Best Buy Deal Expands iPhone's Retail Footprint

Posted by: Arik Hesseldahl on August 13

Electronics retailer Best Buy announced today that it will become the first independent retailer in the U.S. to sell Apple’s iPhone 3G.

Best Buy said it would carry the iPhone at its Best Buy Mobile outlets beginning Sept. 7. Like all other iPhones sold in the U.S., the phone will run only on AT&T’s wireless network. The news comes on the heels of Best Buy’s recent conversion of 970 full-size stores to include a Best Buy Mobile section. This is in addition to its 16 smaller Best Buy Mobile satellite stores.

The deal represents an expansion of the relationship between Apple and the Best Buy, which as of the end of June carried Apple’s Macintosh line of computers in 570 of its stores. Apple COO Tim Cook said during a conference call on July 21 that it expected to expands its Best Buy footprint to 600 stores by the “end of the summer.”

For U.S. market in particular, this would expand the iPhone’s retail presence substantially to nearly 3,200 locations in the U.S. Apple has 188 of its own retail stores in the US, while AT&T operates some 2,000 stores.

Assuming it can keep up with demand, Apple is on track to sell nearly 4.5 million iPhone in the current quarter, says Piper Jaffray analyst Gene Munster in a research note published today. Munster carried out a survey counting sales of phones at Apple stores around the U.S. “We estimate that Apple sells an average of 95 iPhone 3Gs per day at each of its 188 retail stores, up from 21 phones per day a year ago,” Munster wrote. His previous estimate for the quarter had Apple selling 4.1 million iPhones.

The deal is being seen as a win for Best Buy who has been expanding its wireless phone offerings over the course of the last year, and has increased the exposure of its Best Buy Mobile store. Best Buy stock was trading down 6 cents at $44.85 at mid-day. Rival Radio Shack which had also been jockeying to carry the iPhone lost $1.05 or nearly 6% of its value by 1:20 PM on the news.

AT&T stock was down 63 cents or nearly 2%, trading at $31.02 by 1:25 PM

Apple’s stock ticked up on the news initially, trading as high as $179.95, up nearly 2% on the news, and by 1:30 PM Eastern it was at $178.10, up about $1.37.

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