FONE ZONE TO ACQUIRE NEXT BYTE
21-8-2007

In Brief
· Next Byte is Australia’s largest specialist retailer of Apple products and services
· Acquisition set to broaden Fone Zone’s income stream and enhance growth
· Fone Zone’s experience to strengthen Next Byte’s growth strategy
· Presents the opportunity for further range extension in Fone Zone stores

Fone Zone Group Limited (ASX: FZN) has today announced the acquisition of Next Byte, Australia’s largest specialist retailer of Apple and Apple-related products and services.

Fone Zone Chief Executive Officer, David McMahon, said Next Byte represented an excellent strategic acquisition for the Fone Zone group.

“The acquisition of Next Byte will broaden Fone Zone’s base of strategic partnerships and income streams, providing a significantly enhanced platform for future growth in the converging communications, computer and internet markets.”

The total purchase consideration will comprise a $21 million cash payment funded from increased facilities with Fone Zone’s existing bank, and the issue of 16.1 million ordinary shares (12.86% of total ordinary shares on issue).

5,635,000 shares (35%) will be subject to voluntary escrow for one year from the completion date and the remaining 10,465,000 (65%) for two years. The shares will be eligible for the final dividend due to be paid in October 2007. The issue of these shares is not subject to Shareholder approval.

Based on Fone Zone’s 30 day Volume Weighted Average Price (VWAP) of 62 cents, the purchase consideration represents a multiple of approximately five times Next Byte’s FY2007 normalised EBIT of $6.3 million, which was achieved on revenues of $105 million.

“This is a significant milestone transaction for Fone Zone. It enables us to complement our strong product offerings and exclusive relationship with Telstra in the mobile phone market with an equally strong proposition in the field of cutting edge computers and consumer electronics.”

Next Byte has a proven track record of growth and has been able to deliver consistently strong financial results while continuing to enhance its own market position through organic growth and strategic acquisitions.

“With 17 Next Byte stores around Australia, there is an exciting opportunity for additional growth and Fone Zone’s specialist retail experience will clearly enhance Next Byte’s ability to execute this strategy,” McMahon said.

According to McMahon, Fone Zone and Next Byte share similar strengths in solution selling through excellent customer service and it is this similarity that will likely see Fone Zone stores extending their current product range to include selected Apple products.

The current owners of Next Byte have agreed to three year employment contracts to ensure the business continues on its growth path.

The Fone Zone Group will report its full year results for the year ended 30 June 2007, on Tuesday 28 August. These results are expected to be consistent with the guidance issued in December 2006.

Completion of the Next Byte purchase will occur during September, after which further details of the financial outlook for the combined organisation will be provided.

I *finally* got to use an iPhone today. For those of you in the USA who are asking "what's the big deal", the iPhone isn't due to be released here until sometime next year ... maybe.



NOW, mummy; I want it NOW!

In case you were still thinking there won't be an Apple Store in Australia, it's now official as Apple Australia have started advertising for retail store staff.

Let's hope they get some good people!

The architect’s drawings and photo rendering of the now approved Sydney Apple Store show a three-level glass façade that closely resembles the future Boston store. The store front includes a white Apple logo suspended in the middle of the glass panels.

In Apple's photo-rendering of the future building, you can barely make out the glass façade that extends from the footpath up three levels. In the middle is a suspended white Apple logo. The glass façade actually forms a "box" on the front of the building. The façade relies on the companies patented design and structural elements perfected at the Fifth Avenue and other stores.

A rare look at the complicated schematic drawing of an Apple store compiled by Apple's architectural partner, Bohlin Cywinski Jackson (view here), depict a wide but shallow retail mecca totaling some 4,500 square meters (15,000 square feet) about 1,500 square meters (5,000 square feet) per floor. A trademark glass staircase appears to run lengthwise across the right rear.

Other members of the team noted are: mechanical and electrical engineers Flack + Kurtz; glass stairway engineers Eckersley O'Callaghan, Australia-based architects The Buchan Group, and lighting designers ISP Lighting Design.

Of the three floors, the first two will be dedicated to sales of Macs, iPods and other consumer electronics, according to the schematics. Meanwhile, the top floor will be reserved specifically for customer service and include a sprawling genius bar made of wood.

The documents show Apple to have retained the services of ISP Lighting Design to provide the luminescence, Eckersley O'Callaghan to construct the glass staircase, and Flack + Kurtz to tackle the electrical wiring.

Documents also indicate the Cupertino-based company has leased three other spaces within the building at 77 King Street, including a storage area and conference room.

The press are abuzz (again) with rumors of an Apple-owned store in Sydney. This has been floating around for years since Apple stored opening stores in countries outside the USA.

It seems that a Sydney store is becoming much closer to reality. On January 24 2007, the City of Sydney approved DA #D/2006/1932 for the property at 367 George Street Sydney, formerly a Westpac Bank building. Part of the application description states: "Fit out and use of the ground, first and second floors of the glazed podium for an Apple retail store and associated signage. Estimated Cost: $15,427,693"

The stated address is just one block from an existing Apple reseller, a store that's part of the NextByte chain. It's also very close to the Sydney flagship stores for Australia's two largest department store chains, David Jones in Market Street and Myer on Pitt Street who are Apple resellers & have Apple staff in-store to help with sales.

Apple Sydney Store Location


"We have submitted concepts for the store we'd like to build in Sydney," Apple spokesman John Marx said.

"Our stores are a huge hit in the US, Canada, UK and Japan, and we look forward to bringing the unique Apple retail experience to customers in Australia."

Recent media reports have suggested the iPod maker is also planning to open a shopfront in Melbourne, but the company would not confirm or deny this.

It has been rumored that Nike are moving out of their flagship "Niketown" store in Melbourne's Bourke Street Mall, which would be an ideal and very prominent location for Apple. The building sports a multi-story high billboard which has been used by Apple in the past.

All I can say is that I have already arrange with my boss to take time off to camp out for the opening of the Sydney store if/when it eventually happens!

Another note it's only about 3 blocks from Apple's new Australian head office in the Hilton building on Pitt St to the rumoured store location.

Ok so it's not expected to be available in Australia until late 2008, but damn I want an Apple iPhone.

I this video, Apple Inc's Phil Schiller shows John Blackstone the many features of the iPhone.