CFO: Apple ‘not wedded’ to exclusive carrier deals
For the second time in as many weeks, a senior Apple executive has suggested that the company’s current pattern of exclusive iPhones deals with cell phone carriers may not be only way to go. This time, the suggestion came from Apple chief financial officer Peter Oppenheimer during a presentation Wednesday at the annual Morgan Stanley Technology Conference in San Francisco.
“We’re not wedded to any one particular way to go to market,” Oppenheimer said. “Our objective is to drive scale and take market share. We’re going to enter more European countries this year, and Asia, and we remain very confident about our goal of reaching 10 million iPhones shipped in 2008.”
Those comments echoed similar sentiments made by Apple chief operating officer Tim Cook last week at the Goldman Sachs Technology Investment Symposium. When asked about Apple’s exclusive relationships with cell phone carriers, Cook said that even though Apple had made exclusive deals with carriers in all the countries where the iPhone was currently for sale, Apple was not “married” to this model and the company would evaluate each market on a case-by-case basis and “decide what’s best for the company to do.” At present, the iPhone is carried on the AT&T network in the United States, by O2 in the UK (and shortly, in Ireland), Orange in France, and T-Mobile in Germany (and soon in Austria).
These exclusive relationships are one potential factor playing into the prevalence of gray-market iPhone sales abroad and the rising practice of “unlocking” phones for use on any carrier. At the Morgan Stanley event Wednesday, Oppenheimer would not give an estimate of how widespread unlocking was, saying that Apple didn’t have reliable numbers in the most recent quarter. But the Apple executive suggested that it bodes well for the iPhone. “Our perspective is longer term in nature,” Oppenheimer said. “We believe that unlocking is occurring because of unprecedented demand for iPhone. It’s easier to think of it in terms of what countries the iPhone isn’t being used than where it is. I’m not aware of any [countries] where it isn’t. We view this as a positive indicator in future demand and interest in the iPhone. Our horizon here is long…this gives us confidence in what we’re doing.”
Future demand for the iPhone is of critical importance to Apple. The company has vowed to sell 10 million phones by the end of 2008—a target executives reiterated on Tuesday during Apple’s annual shareholder meeting.
Oppenheimer also talked Wednesday about the widespread concern over iPod sales, perhaps because the market for the handheld music player was becoming saturated. While Apple shipped a record number of iPods in the fiscal first quarter of 2008, the number of units shipped grew only 5 percent over the same quarter in 2007.
In challenging the perceived lack of growth, Oppenheimer pointed to the iPod’s sales on an international scale. “We don’t view that market as being saturated. The growth that we saw internationally is not a characteristic of that, and our research shows that about 40 percent of iPods purchased were by people who didn’t own an iPod before.” In particular, Oppenheimer cited last fall’s introduction of the iPod touch as one potential area for growth, saying that Apple sees it as a “new platform.”
Overall, the Apple CFO was positive in his outlook for the company, despite fears of an impending economic slowdown in the U.S. and global economies. “I think our success is more dependent on the innovative products we offer customers,” Oppenheimer said. “We feel very good about each of our geographies and each of our markets.”
During the 45 minute talk, Oppenheimer also touched on the the Apple TV, Apple’s plans for retail stores in the coming year, and the company’s recent success in the higher education market. The full presentation is now available as a webcast on Apple’s website.