Apple is beginning an iPhone trade-in program in June, with the aim of getting users to upgrade to the iPhone 5 and turn in older models, according to Bloomberg News. Apple is teaming up with Brightstar Corp., which is a mobile phone distributor, to run the exchange program, according to Apple insiders who haven't spoken publicly about the plans.
Brightstar currently handles trade-ins for AT&T as well as T-Mobile. They have also partnered with other carriers due to the heavy demand for refurbished iPhone 4s and 4Ss in emerging markets. Tim Cook, the CEO of Apple, is hoping that by offering money for older smartphones, it will entice consumers to upgrade to the latest models, which is part of Apple's efforts to reignite sales growth to combat recent sales decline.
"This will help them sell more phones, because it will lower the consumer's out-of-pocket expense," Roger Entner, an analyst at Recon Analytics LLC in Dedham, Massachusetts, told Bloomberg News.
Amy Bessette, a spokeswoman for Apple, and Patrick Foarde, a spokesman for Brightstar who works for Ketchum, Inc. both declined to comment on the trade-in program.
"The iPhone is an iconic device that people around the world want to own," David Edmondson, the CEO of eRecyclingCorp, another trade-in processor, said. "If they can't afford a new Mercedes, they'll get a used one."
Currently, AT&T is paying up to $200 for working iPhone 4s and 4Ss, which could help some customers buy an entry-level iPhone 5 for no deposit. Approximately 20 percent of U.S. customers that are buying a smartphone this year will be making the purchase using a trade-in, up from 11 percent in 2011.
Apple had previously not dealt with refurbished iPhones or that market. As Apple's growth has slowed in the last few quarters, that perspective has changed. In May, Samsung became the best-selling smartphone brand in the U.S., according to a report by Michael Walkley, an analyst at Canaccord Genuity, Inc.
Apple sold 37.4 million iPhones in the last quarter, which was a decline from the 35.1 million units a year earlier. Shares have declined 38 percent in response, from a previous record in September.
Cook has said that some "game changer" consumer electronic devices are in development, but until then, trade-in programs can support sales of new hardware in mature markets such as the U.S., where many prospective buyers already own a smartphone.
"The key is to get iPhones into as many people's hands as possible," Walter Piecyk, an analyst at BTIG LLC, said. "Selling used phones is one way to do that."
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