Apple Plays Down Contract, iPod Issues With Dell & Other Resellers

by , 12:30 PM EDT, April 10th, 2003

Following news that retail giant Target Corp. and Dell Computer Corp. have stopped selling the popular iPod portable music player because of contractual disputes with Apple, the iPod maker has announced that those dealers who have refused or have yet to sign a new reseller contract make up a small percentage of Apple's overall revenue. An official statement comes after word that some 50 dealers and resellers in the U.S. are balking at signing a new agreement that puts specific restrictions on them in dealing with Apple.

As first reported by Think Secret Wednesday, Target and Dell have stopped selling the iPod after objecting to specific new clauses in a contractual agreement required to sell Apple products. Sources reported the biggest objection is related to Apple's demand to have access to retailer financial records for up to five years.

In a statement released Thursday, Apple said the new reseller agreement was "part of the regular renewal process" and that dealers had until April 1 to accept the new agreement or reject it. Rejecting it would mean a dealer could no longer sell and/or service Apple products. Apple defended the contractual process by saying, "resellers that have not currently renewed made up less than 1.5 percent of Apple's worldwide revenue in 2002." Apple cautioned that "since contracts only expired recently, some contracts continue to be signed."

Apple's net sales for 2002 were US$5.742 billion, with 1.5% of that total representing a potential of some $86 million in lost revenue. If such a revenue loss had impacted Apple's net earnings of $65 million in 2002, the company would have had a loss of $21 million.

A Dell spokesperson told C|Net News Thursday that there is still a chance the company will come to terms with Apple on an agreement, but would not speculate what the chances of that happening would be, or when. Target Corp. did not return repeated phone calls from The Mac Observer asking for comment on the situation with Apple, but store employees and management have confirmed the product has been discontinued from its inventory and that it's more than 1,400 stores nationwide are selling off their remaining inventories, some at discounts, putting prices below cost.

A significant number of Apple Authorized Resellers, or Apple Specialists, have been deauthorized, objecting to the company's new contracts for dealers. Some dealers have reportedly objected to the contract outright and are refusing to negotiate with Apple, while others are trying to work out their differences. Among them include mega-retailers Fry's and MicroCenter, along with a number of large independent Apple Specialists. The new contract terms come as a number of Apple Specialist dealers have filed suit against Apple accusing the Mac-computer maker of illegal practices.