Report: iPod shipments tracking for first yearly decline

[AppleInsider]

Shipments of Apple's iPod digital music players could see their first yearly decline come the end of the company's March quarter, investment bank Piper Jaffray said Monday.

In a research note to clients, analyst Gene Munster said he's analyzed the first month (January) of NPD market research data for the three-month period ending March and found it to suggest total iPod unit shipments of between 9.5 million and 10.3 million units for the quarter.

Should Apple manage to hit the midpoint of that 9.5 to 10.3 million estimate, shipments would have still declined by approximately 6 percent from the same period last year when the company shipped 10.54 million units -- marking the first time iPod shipments have fallen on a yearly basis since Apple began providing sales figures for the digital media player line back in the fourth quarter of 2003.

Munster's findings also come in shy of Wall Street's current consensus estimates, which have the Cupertino-based electronics maker shipping approximately 10.8 million iPods during the quarter, representing 2 percent yearly growth.

Still, Munster viewed his findings as "a slight positive" given all the recent Street chatter of extremely weak iPod numbers for the quarter and the potential for the recently announced iPod shuffle price cut to fuel higher than expected shipments during the months of February and March.

"The 9.5 million -10.3 million unit approximation is based on various assumptions and is an extrapolation of one month of data," he explained. "When the second month of data is released, our analysis will likely lead to a slightly different iPod unit figure than what our analysis suggests based on the first month of data, so we believe investors should supplement this data point with other information."

Declining growth of the standalone MP3 player market, as well as Apple's overall iPod business, has been a cause of concern for investors following the company's December quarter results, which had sales of the players come in relatively flat in the US for the first time in recent history.

While some have feared the declines are indicative of an iPod business that has reached its saturation point, Apple executives have discounted that notion, noting that iPod revenues grew 17 percent year-over-year during the December quarter, a figure they maintain is "uncharacteristic of a saturated market."

Moving forward, the company said it hopes to evolve the iPod beyond an advanced music player and into the first "mainstream Wi-Fi mobile platform" capable of running "all kinds of mobile applications." This strategy would indicate a focus on selling quality and functionality at a higher price, rather than quantity and less functionality at the absolute lowest price. As such, Apple has suggested that the best way to measure the overall growth and performance of the segment is no longer by unit metrics, but rather by revenues.

[ View this article at AppleInsider.com ]

[Zandros]

Is it silly of me to think that iPhone sales really should be considered when they assess whether the PMP business of Apple has begun experiencing negative growth, even if it should not be included in total and average iPod revenue?

/Adrian

[SpamSandwich]

Y'know, it's not exactly like Apple has put itself in the position of having just a few hit consumer products. AAPL is feeling the pinch, though for the current perception is that all business is just iPhone and iPod business. Am i rambling?

[Zandros]

Originally Posted by SpamSandwich

Y'know, it's not exactly like Apple has put itself in the position of having just a few hit consumer products. AAPL is feeling the pinch, though for the current perception is that all business is just iPhone and iPod business. Am i rambling?

I do not think so. Was Mac revenues not up more than iPod revenues this last year anyway?

/Adrian

[GrandmasterGar3th]

Originally Posted by Zandros

I do not think so. Was Mac revenues not up more than iPod revenues this last year anyway?

/Adrian

iGene is fawning again.
Face it fanboy it's the Zune cannibalizing iPod sales.
appl was planning to hold off 32gb iTouch, Shuffle till Sept but were compelled to do this quarter to boost lagging sales.

[jmadlena]

Originally Posted by GrandmasterGar3th

iGene is fawning again.
Face it fanboy it's the Zune cannibalizing iPod sales.
appl was planning to hold off 32gb iTouch, Shuffle till Sept but were compelled to do this quarter to boost lagging sales.

Show us some numbers showing that it is the Zune cannibalizing iPod sales. Perhaps it is other competitors as a whole doing damage to iPod growth, but I haven't heard anything that would indicate the Zune is the cause for the possible iPod slow-down. I don't really research the Zune, so if someone has some numbers or links please post them.

But Zandros was right, iPods may be a high volume seller for Apple, but Macs are the meat of their business. They have much higher margins on Macs, IIRC. I'm not upset with Apple that they might be having a slow-down in iPod sales because the iPod numbers for the past few years have been phenomenal. It has to end sometime.

Also, is the 'fanboy' comment really necessary? He was just stating a fact, so I don't believe it is necessary to start name calling. Let's start acting like grownups now, thanks.

[NasserAE]

Originally Posted by GrandmasterGar3th

iGene is fawning again.
Face it fanboy it's the Zune cannibalizing iPod sales.
appl was planning to hold off 32gb iTouch, Shuffle till Sept but were compelled to do this quarter to boost lagging sales.

Please, you must be kidding!! I have never seen any Zune player in our campus so far. The only one I have seen students using are iPod Nano, iPod Classic, Touch, iPhone, and some other cheap player. Dream on.

And By the way, I have been to the mall this weekend for the first time this year and I was wondering "What recession are those people talking about?!". Never seen the mall crowded on non holiday season before. I couldn't even have my hands on MBA because of the number of people inside Apple Store. I am 100% sure that many retailers (specially Apple) will post better than expected revenues this quarter.

[mbene12]

Ugg this is killing me. Negative news in this market will kill the already craptastic stock price for the next 3 months. I can honestly see another 6-10 dollar drop on this news. None of it justified, but Apple never says anything and so the speculation will drop the stock in the toilet.

[cameronj]

Originally Posted by mbene12

Ugg this is killing me. Negative news in this market will kill the already craptastic stock price for the next 3 months. I can honestly see another 6-10 dollar drop on this news. None of it justified, but Apple never says anything and so the speculation will drop the stock in the toilet.

If you think the stock will drop like that as a result of this non-news, you're nuts.

The stock has already priced in the worst case scenario for Apple right now. If you think things will turn out better than worst case, it's a good time to buy. Maybe some longer term (late summer/fall) out of the money calls if you're really confident that things are not as bad as they seem. That's what I've bought recently, by the way.

Either way there's not a lot of room left for the stock to drop - the assumptions you have to make about sales and profit growth to justify lower prices than today are pretty extreme.

[dmz]

I'll go with some inevitable market saturation on the iPod -- but with Leopard adoption, more streams for the iPhone, AppleTV, the Mac 30ish% percent yearly creep in market share, and things like movie rentals, I think it will all come out in the wash.

This downturn in the stock may have more to do with this:

http://www.nytimes.com/2008/01/27/bu...p=2&sq=&st=nyt

...than anything else.

[aaplguy]

Zune?
A check of Amazon top MP3 list shows that the price chop on the Shuffle has spurred sales. That alone will have an effect on Munsters numbers, probably get them closer to that 10.5 rate. I pod sales ARE slowing. The fact is there is not a compelling reason to buy in the 150 to 250 sweet spot that has spurred sales in the past. We will see a 199 variation of the touch and price drops on the higher mb models. Apple can drop prices on the Nano if they want -- but I see them keeping those price points to be filled by more desirable models --same is true for the Iphone.

[mbene12]

If you think the stock will drop like that as a result of this non-news, you're nuts.

Dont get me wrong, I dont think it should and i certainly dont want it to. I know the PEG is fantastic and the P/E is pretty good considering the premium the company in question usually commands. That said, there is some major negative sentiment that seems to be buzzing around the stock. It keeps lagging the market significantly even after the huge recent downturn.

Great buying opportunity of course. Wish I had anymore to throw in and sit on, house purchase coming up though and I hate the thought of selling part of it anytime soon.

[ouragan]

Moving forward, the company said it hopes to evolve the iPod beyond an advanced music player and into the first "mainstream Wi-Fi mobile platform" capable of running "all kinds of mobile applications." This strategy would indicate a focus on selling quality and functionality at a higher price, rather than quantity and less functionality at the absolute lowest price.

Maybe, now, it's time to offer what customers want, not what stock option grabbing executives decided. How about an iPod Radio, adding functionality to a lower price? This would be bound to spur sales.

[Gm7Cadd9]

first yearly decline...

as in the growth has declined, not the numbers. Year over year the numbers are still growing, how insane is that? Despite reaching near full market penetration and market saturation as they like to say, sales are still UP, however the rate at which they normally grow is down...I love FUD.

if the rest of the market weren't doing so shitty I would say NOW is the time to buy Apple Stock, look at me buying into FUD myself by not buying, damn....I wish I was more brave.

[ouragan]

This strategy would indicate a focus on selling quality and functionality at a higher price, rather than quantity and less functionality at the absolute lowest price. As such, Apple has suggested that the best way to measure the overall growth and performance of the segment is no longer by unit metrics, but rather by revenues.

When is Apple going to face reality and offer competitive prices?

Maybe the CEO should get a university education and realize that there are better ways to make money than just raising prices.

[anantksundaram]

Originally Posted by GrandmasterGar3th

appl was planning to hold off 32gb iTouch, Shuffle till Sept but were compelled to do this quarter to boost lagging sales.

Really? How do you know this?

[anantksundaram]

Originally Posted by Zandros

Is it silly of me to think that iPhone sales really should be considered when they assess whether the PMP business of Apple has begun experiencing negative growth, even if it should not be included in total and average iPod revenue?

/Adrian

IMHO, yes.

The iPhone seems to have morphed into a category of its own, and its contribution to Apple's bottom line is being quite appropriately (and adequately) valued in its stock price, in my view.

[anantksundaram]

Originally Posted by mbene12

Ugg this is killing me. Negative news in this market will kill the already craptastic stock price for the next 3 months. I can honestly see another 6-10 dollar drop on this news. None of it justified, but Apple never says anything and so the speculation will drop the stock in the toilet.

If you feel so strongly about this, it is surely a fantastic wait-and-buy opportunity?

[Adjei]

Originally Posted by ouragan

When is Apple going to face reality and offer competitive prices?

Maybe the CEO should get a university education and realize that there are better ways to make money than just raising prices.

Why don't you go and run Apple since you're the one with the university education.

[jmadlena]

Originally Posted by ouragan

When is Apple going to face reality and offer competitive prices?

Maybe the CEO should get a university education and realize that there are better ways to make money than just raising prices.

I think Apple is doing pretty well under Steve Jobs leadership.

/Understatement of the century

Apple's stock price went from the 10's of dollars to $200 in a few short years because of him. Your statement would have been acceptable in 80's and 90's during the John Sculley and Michael Spindler days, but not anymore. High margins mean they make more money, which means they can use more for R&D, which means better products. I think their strategy is pretty great how it is, although I wish they would do a bit more bug testing for software nowadays.

Other than that, long live Steve Jobs at Apple, Inc.

[GQB]

Originally Posted by ouragan

How about an iPod Radio, :

Maybe because radio is dead?
Same reason AppleTV won't incorporate DVR.
Each are aimed at killing off (or rising from the ashes of) moribund technologies.

Ala carte is the future.

[anantksundaram]

Originally Posted by GQB

Maybe because radio is dead?

Except for NPR and Rush Limbaugh!

[JeffDM]

Originally Posted by GQB

Maybe because radio is dead?
Same reason AppleTV won't incorporate DVR.
Each are aimed at killing off (or rising from the ashes of) moribund technologies.

Ala carte is the future.

People have said statements like that for nearly a century. I don't think radio will ever die, as much as I would like it to. TV was supposed to kill radio, remember? Radio was supposed to kill newspapers. It is true that each new technology diminished the demand for the previous, the claimed killing never happened. They generally adapted and their role has changed. As such, knowing the history, I think you're just talking bunk.

[tuneman07]

Man I hope radio isn't dead since I listen to it probably oh maybe 10 hours a day lol. Come on what else would I do at work? ........ I would have to work. That would suck. BTW why would anyone be surprised sales are not skyrocketing I mean who doesn't already have an Ipod.

[Splinemodel]

Originally Posted by cameronj

If you think the stock will drop like that as a result of this non-news, you're nuts.

I agree. The trick is really quite strange: all of the market analysts have iPods and iPhones. They see these every day, and use them. As macs continue to become more popular in the overall market and especially among higher income consumers (analysts), the stock will stop being such a market anomaly.

Apple right now is undervalued. There are also growing middle and upper classes in Asia, which mean (especially) iPod market growth for the foreseeable future, but also mac growth in markets that are currently non-existent. In fact, one could argue that the positioning of Apple as a premium brand makes it the best buy in the entire industry, although I don't care to get into the finer points of global economics that explain why this is the case.

[iBill]

Originally Posted by jmadlena

Show us some numbers showing that it is the Zune cannibalizing iPod sales. Perhaps it is other competitors as a whole doing damage to iPod growth, but I haven't heard anything that would indicate the Zune is the cause for the possible iPod slow-down. I don't really research the Zune, so if someone has some numbers or links please post them.

I haven't got sales numbers for Zune, but I did check the best selling mp3 players at Amazon.com. There is only one Zune in the top 25, coming in at #16. Apple iPods have 16 of the top 25, including the top 4, 4 of the top 5, 8 of the top 10, and 14 of the top 20. Amazon isn't the only retailer of course, but consider also that a high percentage of iPods are sold directly via Apple (where there are obviously no Zunes sold) and you have a compelling argument that Zune is not, in fact, eating into iPod sales.

What seems more likely is that all the talk of recession lately has depressed non- discretionary spending, and digital media players aren't on the top of the priority list. Despite this, however, iPods still seem quite popular at Amazon.com.

[cameronj]

Originally Posted by iBill

Apple iPods have 16 of the top 25, including the top 4, 4 of the top 5

Heh, the top 4, AND 4 of the top 5? That's remarkable! I bet they have 4 of the top 6 too And both of the top 2. And the top seller and all three of the top 3

[DogGone]

A number of things to consider:

1. iPod sales have been plateauing for a while now. Totally expected given the market penetration and economic situation.

2. Apple are skating to where the puck will be. The iPhone and the iPod touch are the next new thing that will take off this year and next.

Conclusion: as standard iPod sales wane, iPhone and iPod Touch sales will take off. Apple knew this would happen. They had to provide another reason for us plebs to plonk down more dosh for their products.

I, myself, am waiting for iPod Touch 32 gig to be 299.

[Bregalad]

It's not surprising that sales growth is slowing. A very large number of people have the music player they want and need to be shown new features before they'll buy again. When the Touch reaches mass acceptance pricing sales will go up dramatically as people with ordinary music only or music plus microscopic screen size video players realize what they've been missing.

I'm still waiting for a high capacity flash based unit with the traditional iPod interface because I can't make use of the Touch screen while walking, standing on a bus/train, or driving.

[ascii]

Ummm... Apple Execs: you can't evolve the iPod in to a mainstream WiFi platform if people don't actually want that.

[winterspan]

Originally Posted by ouragan

Maybe, now, it's time to offer what customers want, not what stock option grabbing executives decided. How about an iPod Radio, adding functionality to a lower price? This would be bound to spur sales.

what the hell is an "iPod radio".. "radio" is such an ambiguous word in laymen consumer usage, even knowing the context of an iPod.

1) Existing Ipod model with integrated FM radio tuner? if so, what model?
2) "Radio" aka speaker box with integrated iPod dock ?
3) iPhone/iPod Touch with streaming online "radio"?
4) iPod radio telescope

[Hattig]

Well, some people will have an iPhone, and have thus not bought an iPod in their annual/bi-annual/tri-annual iPod replacement spending spree. iPod sales might be down, but there's cannibalisation from a different Apple product.

Also there's a huge worry about a potential recession, and that makes people spend less money on non-essentials. I'm surprised the drop isn't harsher, and I think suspect that a large portion of Apple's demographic are in no place to get worried by this (the well off and students living off loans), and that other people will make their iPod last another year if possible, or get a cheaper iPod, or get a cheaper player, or make do with their phone.

A cheaper Shuffle is a good idea in this light - better to sell a cheap player than no player. The effects might mean that unit sales don't finally drop YoY.

[Hattig]

Originally Posted by ascii

Ummm... Apple Execs: you can't evolve the iPod in to a mainstream WiFi platform if people don't actually want that.

The Touch is the reason that iPod per-unit revenues are rising for Apple, it is selling very well.

[Abster2core]

Originally Posted by Adjei

Why don't you go and run Apple since you're the one with the university education.

What makes you think that he has any education. I thought we were going to ignore his posts since virtually every one of them is just trashing Apple.

[wizard69]

Originally Posted by mbene12

Ugg this is killing me. Negative news in this market will kill the already craptastic stock price for the next 3 months. I can honestly see another 6-10 dollar drop on this news.

Actually I can see the price getting down to $75. The only thing tht would hold the rpcie up is continued good introduction of new Macs!

None of it justified, but Apple never says anything and so the speculation will drop the stock in the toilet.

Actually I think it is very justified and is a rebuke of Apples marketing approach to the iPods in general and the Touch devices specifically. The problems / perceptions that the market has of Apple are as follows:

1.
Apple has failed to track the price of Flash on their already over priced hardware. This has put them in a bad competitive light and has angered the more knowledgeable users of their products.

2.
Apple still seems resistant to addressing consumer issues with DRM.

3.
Apple has failed to introduce new hardware with more storage capacity, at reasonable price points, with respect to Touch.

4.
Apple has failed to recognize that the Touch and iPhone in many peoples mind is a small computer and thus a source of frustration for many users. The primary issue being the ability to run software not blessed by Apple. This will haunt them for a long time and only requires the right company to come along with the right product to blow them out of the water.

5.
Apple has been amazingly slow about fixing the OS on the Touch based devices. Mobile OS in many minds is simply an unfinished OS. More so to really leverage the SDK, developers will need better access to the machines. This means such things a fully fleshed out networking and Bluetooth stacks. Apples failure here means they don't recognize the potential of their own hardware, nor have a clue as to how the users would like to leverage that hardware. Basically a gross sign of Apple being out of touch with the market.

6.
Apple has been slow with product upgrades and family fill outs. It boggles the mind that the iPhone doesn't have a low cost brother in the line up. Apple recognized that people would switch over to music playing phones but they failed to realize that the majority of the music playing phone users don't need a fancy smart phone. They need a cell phone that plays music.

7.
iPhone is way to expensive especially considering how neglected the OS is on the device. People have finally started to realize that they are paying Apple a lot more for the iPhone than the sticker price indicates. Considering the devices limitations and the poor performance of Apple with respect to software updates that is a big negative.

8.
Apple has been very vocal about a future filled with video/movies and such on the iPods yet they really don't have an platform in the ipod line up that is optimal for the delivery of such video content. The Touch comes close but it is not in any respect a good platform for video, rather it is just passable. The smaller devices are so small as to make one wonder why people would even bother.

In any event I can't help but to thing Apple pretty much deserves its current crunch in the stock market. Maybe they will wise up and fix a few of the issue above. Frankly I see them as a whale in the ocean slow to turn. They might get around to it but if they are not quick somebody else will grab the goodies.

Dave

[wizard69]

Originally Posted by ouragan

Maybe, now, it's time to offer what customers want, not what stock option grabbing executives decided. How about an iPod Radio, adding functionality to a lower price? This would be bound to spur sales.

It couldn't have been said any better by anyone! Apple needs to respond to consumer wants and needs. Ultimately it is the only thing they can do to keep sales going.

Dave

[foobar]

Originally Posted by Gm7Cadd9

first yearly decline...

as in the growth has declined, not the numbers. Year over year the numbers are still growing, how insane is that?

Did you read the article? It clearly says the sales number could decline compared to last year. Growth has been declining for a while now. (Sustaining the growth from 2005 would have meant a billion iPods a year.)

I don't think, however, that Apple is in trouble. We're seeing some a lot of scared consumers holding back right now, which hurts every company out there. Apple should continue to be among the most profitable ones, especially with their rising average sale price.

With all the fear and rumors around AAPL is a cheap buy, as long as you have the time (and nerves) to stick through all this. The stock could go a lot lower still. Never underestimate investor panic...

[JeffDM]

Originally Posted by wizard69

2. Apple still seems resistant to addressing consumer issues with DRM.

They started, Apple was the first, but I think the remaining studios are holding out on Apple here. The music doesn't belong to Apple, so they need the cooperation of the labels.

3. Apple has failed to introduce new hardware with more storage capacity, at reasonable price points, with respect to Touch.

Is there another media player with 32GB of solid state storage and as big or bigger screen?

4. Apple has failed to recognize that the Touch and iPhone in many peoples mind is a small computer and thus a source of frustration for many users. The primary issue being the ability to run software not blessed by Apple. This will haunt them for a long time and only requires the right company to come along with the right product to blow them out of the water.

This is just an assumption on your part. As the terms of the SDK aren't known yet.

5.Apple has been amazingly slow about fixing the OS on the Touch based devices. Mobile OS in many minds is simply an unfinished OS. More so to really leverage the SDK, developers will need better access to the machines. This means such things a fully fleshed out networking and Bluetooth stacks. Apples failure here means they don't recognize the potential of their own hardware, nor have a clue as to how the users would like to leverage that hardware. Basically a gross sign of Apple being out of touch with the market.

"leverage"? You let the market-speak in. It's just an effette way to say "use".

6. Apple has been slow with product upgrades and family fill outs. It boggles the mind that the iPhone doesn't have a low cost brother in the line up. Apple recognized that people would switch over to music playing phones but they failed to realize that the majority of the music playing phone users don't need a fancy smart phone. They need a cell phone that plays music.

That wouldn't be anything special.

8. Apple has been very vocal about a future filled with video/movies and such on the iPods yet they really don't have an platform in the ipod line up that is optimal for the delivery of such video content. The Touch comes close but it is not in any respect a good platform for video, rather it is just passable. The smaller devices are so small as to make one wonder why people would even bother.

What do you have in mind?

[cykz]

Originally Posted by GrandmasterGar3th

iGene is fawning again.
Face it fanboy it's the Zune cannibalizing iPod sales.
appl was planning to hold off 32gb iTouch, Shuffle till Sept but were compelled to do this quarter to boost lagging sales.

I had a good laugh on that one. And the replies. Thanks!

[SpamSandwich]

Originally Posted by dmz

I'll go with some inevitable market saturation on the iPod -- but with Leopard adoption, more streams for the iPhone, AppleTV, the Mac 30ish% percent yearly creep in market share, and things like movie rentals, I think it will all come out in the wash.

This downturn in the stock may have more to do with this:

http://www.nytimes.com/2008/01/27/bu...p=2&sq=&st=nyt

...than anything else.

I'd agree there is probably a huge cadre of traders making bank shorting AAPL right now... the rotters!