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Apple Inc. (AAPL) Makes a Small but Important Move in Russia

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Within the important BRIC emerging markets, Apple Inc. (NASDAQ:AAPL) has been focusing most heavily on China, Brazil, and India, in that order.

The “Greater China” segment has grown large enough that Apple Inc. (NASDAQ:AAPL) now discloses it as a separate geographical operating segment, bringing in $8.8 billion last quarter including retail operations. Apple cut iPhone prices in Brazil earlier this year. The company has also overhauled its Indian operations in an effort to grow its presence.

What about Russia? Apple Inc. (NASDAQ:AAPL) has just opened its online store in Russia for the first time.

Russian direct sales, check
Last August, I compiled a table of which BRIC countries Apple Inc. (NASDAQ:AAPL) operates retail stores in and where it offers direct sales to consumers. Both aspects have proven critical to Apple’s overall success in a given geography, since it can better control the purchase experience and bolster its relationship directly with consumers. With Apple setting up online shop in Russia, investors can now check off a box in this table.

Country Direct Sales Retail Stores
Brazil Yes No
Russia Yes No
India No No
China Yes Yes

Source: Apple. Change since August 2012 shown in bold.

Apple Inc. (NASDAQ:AAPL) now sells directly online in three out of the four BRIC countries.

Apple Inc. (NASDAQ:AAPL)On the retail side, there’s still a lot of work to do. Apple has already confirmed that it’s preparing to open a retail store in Rio de Janeiro, marking its first direct foray into Brazil. Apple Inc. (NASDAQ:AAPL) has also reportedly scouted out potential retail locations in Moscow. India remains a challenge with direct sales and retail stores, in part due to complex regulations about foreign ownership of single-branded retail stores.

The big Russian smartphone picture
Russian carrier Mobile TeleSystems OJSC (ADR) (NYSE:MBT) compiles quarterly reports about the market, giving investors a valuable glimpse into the foreign market. MTS is the largest carrier in Russia, with 71.3 million subscribers, so it has a pretty good pulse on the market. MTS estimates that there were a total of 3.5 million smartphones sold in the first quarter, accounting for 78% of all mobile handsets sold.

The average smartphone selling price in Q1 was approximately $333. This shows how important it is for Apple Inc. (NASDAQ:AAPL) to release its expected mid-range iPhone, since the oldest and cheapest model it currently sells in Russia is the iPhone 4 that costs $455. The newest iPhone 5 costs an astonishing $912 for an entry-level model (a 64 GB model costs over $1,200).

Since Russia is an unsubsidized market, Apple grabs only an 8% market share, according to the MTS estimates. Google Inc (NASDAQ:GOOG) has strengthened its Android lead over the past year.

Operating System Q1 2012 Q1 2013
Android 43.9% 70.1%
Asha 8.4%
iOS 5.6% 8%

Source: MTS.

Nokia Corporation (ADR) (NYSE:NOK)‘s Asha lineup, which didn’t exist a year ago, is off to a strong start, but Asha will be pressured as Android devices inevitably become cheaper. Nokia’s overall market share as a vendor dropped by over half to 14.5%, mostly as it abandoned Symbian.

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