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For Apple, Next Stop Japan

Daniel Del'Re

SAN FRANCISCO -- Following much fanfare in Europe's largest consumer markets, Apple (AAPL Quote) is laying the groundwork to launch its iPhone in Asia.

The company is reportedly talking to Japan's top tier telecom carriers about selling its popular multimedia phone for use on their networks. A report by The Wall Street Journal says Apple has approached NTT DoCoMo (DCM Quote), Japan's largest carrier, and Softbank, currently the No. 3 player.

Apple will likely to pursue exclusive deals with these carriers, as it has in the U.S. and Europe, and seek to share the sale and service revenue from each device. The company did not respond to a request for confirmation.

The move would take the iPhone to one of the world's most tech savvy populations. Japanese consumers are avid gadget fans, especially when it comes to pricey multimedia cell phones. Many store credit card and banking information in their phones, which can then be used to make purchases by swiping the phone in front of sensors at cash registers.

The challenge for Apple is to get Japanese consumers, who are used to fast mobile Internet connections, interested in a phone that operates on a slower 2G network.

"Speed is the urgency for multimedia tasks like Web browsing and downloading music," says Jack Gold, telecom market analyst and head of J. Gold Associates. "Anytime you come to market with something that isn't up to peak speeds, it's going to be an issue."

Analysts from Piper Jaffray and American Technology Research published reports on Monday, saying that issues surrounding battery life would hinder Apple from launching a 3G iPhone until the latter half of next year.

Despite the slower network speed, Apple's cachet carried the iPhone to robust sales in the months following its June debut in the U.S. Consumers bought 270,000 phones in the first 30 hours that it was available, and another 1.1 million during the past quarter.

iPhones contributed just 2% of Apple's total revenue in the last quarter because Apple amortizes each iPhone sale over a two-year period. Those sales came entirely in the U.S. Apple launched the iPod in the U.K., France and Germany in November.

In all four countries where the iPhone is available, consumers lined up outside of stores for hours -- and in some cases, days -- before of the product launch waiting to be one of the first to own the iPhone. Within hours of store openings, bloggers posted photos of eager shoppers making their purchase.

Apple is clearly hoping that the same behavior plays out in Japan, where the company's presence is still very small. Sales in Japan shrank 11% in the last fiscal year and accounted for just 4.5% of Apple's total revenue.

In addition to finding a new market for the iPhone, Apple and its investors would like to see the device's so-called "halo effect" help boost weak sales of Mac desktop computers, which were in part responsible for sagging sales in the country.

Shares of Apple were recently trading down $2.66, over 1%, to $181.74.