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Special Report: The end of Apple's iPod era part II

post #1 of 58
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The other side of the debate -- I recently published an article arguing that the iPod’s importance to Apple’s overall quarterly revenue has diminished to the point of being almost irrelevant to Apple’s growth. Yet, this article seemed to hit the nerves of iPod aficionados who ardently contend that the iPhone is an iPod, and to say otherwise, would constitute the highest level of blasphemy to the Apple investment community.

So I thought that in the interest of fairness and balanced reporting that I would present the other side of the debate, and let my readers decide which of these viewpoints makes the most sense.

In my previous article, I demonstrate how the facts according to Apple, suggests that the iPod is no longer that large of a revenue driver when compared to Apple’s other sources of revenue. I exhibit how the iPod as a percentage of Apple’s overall revenue has been on a consistent and steep decline since Q1 2006. This is due in part to the iPod’s maturing growth rate, and in large part, to the iPhone and Mac computer line taking the helm as Apple’s main source of revenue.

Apple’s fiscal year starts in October and ends in September. When it reports its quarterly earnings, Apple generally publishes a revenue breakdown for each of its six primary operations (iPhones, iPods, Macs, iTunes + music accessories, Software and Peripherals). It defines the general category of “iPod” to include sales from the iPod Touch, iPod Nano, iPod classic and iPod shuffle without reference to the iPhone.

So those four devices are what make up the revenue in Apple’s iPod category. While Apple doesn’t breakdown unit sales and revenue for each line of its iPods, Steve Jobs will from time to time let us know how many iPod touches it has sold during media events. Based on Apple’s definition of the term iPod revenue, the four charts below clearly and undeniably illustrate how the iPod as a percentage of Apple’s direct and recorded revenue has been on a steep and consistent decline since 2006.

If this isn’t already self-evident, here is exactly how the charts should be read. The first chart shows iPod revenue from 2006 to 2010. The second chart is of iPod unit sales. The third chart details iPod revenue as a PERCENTAGE of Apple’s overall revenue. This chart is important because it unmistakably illustrates how the iPod’s impact to Apple’s recorded revenue has been on a decline since 2006.

The fourth chart is of Apple’s recorded revenue from 2006 to 2010. This chart is important because it shows how Apple’s overall revenue has continued to demonstrate explosive growth despite the fact that iPod revenue (shown in chart #1) has posted either slightly positive or slightly negative growth over the past few years. Please note that Q3 and Q4 are merely estimates and that actual results may differ.









Misinterpreting the Analysis

My argument shouldn’t be construed, though I’m positive it will be, to suggest that I believe that Apple should somehow discontinue selling the iPod or that the iPod is doing poorly as a device. In fact, the iPod Touch is arguably one of Apple’s most important products as that device is a gateway drug to Apple’s other products, so to speak. It introduces those who don’t already own an iPhone to the iPhone OS, making it the most proficient use of advertisement in the entire tech industry. That OS powers two of Apple’s most important product lines – the iPhone and iPad. And evidence suggests that this iPhone OS will power an all encompassing media hub being used in a flat screen TV that Apple is potentially developing.

Moreover, the iPod halo is still very much in full effect as each device gives consumers a broad introduction to the Apple ecosystem. So while the iPod isn’t as big of a player as is the iPhone or Macintosh when it comes to total revenue contribution, it still plays a key role in Apple’s overall business strategy. This much should be obvious as there still remains quite a large number of intangible benefits Apple derives from the iPod - a driver for revenue growth is just no longer one of those benefits.

One Alternative Viewpoint: iPhones are iPods, STUPID!

In January of 2007, Steve Jobs wowed his audience at Macworld, investors and the entire financial world with his introduction of the iPhone. During his keynote address, he called the iPhone “The best iPod Apple has ever made.” He began his introduction by saying, “Well today, we’re introducing THREE revolutionary new products. The first one is a widescreen iPod with touch controls, the second is a revolutionary new mobile phone and the third is a breakthrough internet communications device.” He continued, as the crowed held its breath, “An iPod, a phone, an internet mobile communicator. An iPod, a phone, an internet communicator…these are NOT three separate devices!” And to add a cheery on top, he went on to say: “we are calling it iPhone!”

This was huge news as the entire Apple world was convinced that due to legal constrains, Apple would be unable to name this new potential breakthrough device the “iPhone.” So it came as a great surprise to the entire financial community when he came out, gave the classic Steve Jobs’ finger to the term impossible (the reason everyone loves him), and called it the iPhone – I’m sure he told his lawyers to make it happen.

After reading the comments to my article published at Appleinsider, I discovered that quite a large number of people hold the view that the iPhone is an iPod. That even Steve Jobs made it perfectly clear that it’s an iPod (in fact the best iPod Apple has ever made), and that trying to characterize the iPod classic, iPod Touch, iPod Nano and iPod Shuffle as being Apple’s only iPods would patently misrepresent the facts. The “iPhone is an iPod, stupid” forms the basis of many of the arguments against the conclusion that the iPod (as defined in Apple’s financial statements) contributes an increasingly smaller portion of Apple’s overall revenue.

Many would go on to argue that the only appropriate way to view and analyze iPod sales is by adding iPhone unit sales and revenue to iPod unit sales and revenue. Doing this, several have argued, will produce a true picture of the “real” iPod unit sales and revenue growth over the past 5 years; that the charts and tables outlining iPod sales above are inherently flawed because they unfairly breakdown iPod sales and revenue, as defined by Apple, without taking iPhone sales into account. The two charts below outline iPhone + iPod unit sales and iPhone + iPod revenue from 2006 to 2010. These charts form the basis of the iPhone is an iPod viewpoint. So without further ado, will the real iPod Category please stand up?





Thus, one will argue, that according to the two charts above, the “real” iPod unit sales, unlike iPod sales as defined by Apple and the rest of the financial world, shows that iPod unit sales are growing quite consistently. Sure, adding the two together dilutes the growth rate of iPhone standing alone; but who cares as long as we’ve shown that iPod sales are still growing right? “Real iPod” revenue growth is far more dramatic, owing in large part to the $630 - $660 ASP that the iPhone normally enjoys versus the $150 to $170 ASP the iPod usually records. So while overall unit sales don’t look super impressive, revenue growth looks very strong. And we can’t get a true picture of how important the “real iPod” is to Apple’s revenue without looking at “real iPod” as a percentage of Apple’s revenue. The chart below outlines iPhone + iPod revenue i.e. “real iPod” revenue as a percentage of Apple’s overall revenue:



Notice how by Q4 2008, it appears that Apple gets about 50% of its business from the “Real iPod” making the company appear overly dependent on one of its primary operations for growth. While my argument shows that Apple is multi-dimensional and not overly dependent on the iPod, those in support of the 'iPhone is an iPod' theory, makes it such that Apple is very dependent on this new category. Yet, the charts above do show how if the iPhone was characterized as an iPod, that iPod growth is alive and well. Of course it also demonstrates how important the iPod would become to the company’s financial well being.

Now here is why I think this is not only a very misguided, but dangerous viewpoint of the company from a financial perspective. First, the very last impression that any company wants to give investors, financial analysts and the financial media is that a company can only do a handful of things well, and that the company is too overly dependent on any one of its product lines.

In fact, Apple has worked very hard to demonstrate how well they are able to innovate by showing that they are not just a one or two dimensional company, but that they can make 4 separate and very successful products driving their overall revenue growth. By collapsing iPod and iPhone sales, it suggests that Apple is merely a two dimensional company. That the only thing they can do in terms of innovation is just make fancier iPods and sell Macintosh computers.

Apple has wisely chosen not to go this route. Instead, they break down their main revenue drivers into 4 distinct categories - iPods, iPhones, Macintosh Computers and now iPads. Over the past few years, iPod unit sales and revenue started to weaken. In the face of this weakness, Apple demonstrated their ability to innovate by introducing the iPhone and now the iPad. I’ve seen some arguments where some hold the view that iPads are merely iPods as well. This held belief is extremely counterproductive from a financial perspective.

Once again, no one is expecting that Apple or any company should be able to introduce a product that will grow from now into perpetuity. What money managers and analysts do expect is that Apple should able to make new fresh products that can take the helm of driving growth as some other product reaches maturity. In this case, Macintosh sales took over as Apple’s main revenue driver in 2007 followed by the iPhone in late 2008. The iPad will also drive future growth as the product sets to posts more revenue than the iPod in its inaugural quarter.

Fund managers are far more concerned with how well iPhone, iPad and Macintosh sales fare than they care about the archaic iPod. For the past few years, iPod sales have been slightly up to slightly down. Yet, no one seems to make a stink about it, because no institutional investor or analyst really gives a hoot about iPod sales anymore. Instead, the central focus of Apple’s financial picture is on the explosive growth the iPhone posted in Q1 and Q2 of this year.

What these two articles demonstrate is how Apple can innovate in the face of slower growth from its former main revenue driver, the iPod. These articles get ahead of future debates about whether Apple can continue to grow given the law of large numbers. 'Is Apple getting too big for its own good?' This tends to be the general question posed among money managers and analysts these days. Not whether the iPod can continue to drive future growth. An argument that the 'iPhone is an iPod' is definitely not the best way to view the company or its future growth prospects.

Instead, view the iPod for what it is. It’s a device that helped Apple escape the brink of bankruptcy. It’s a device that helped drive Apple’s growth for much of the past decade. It’s a device that produces quite a substantial halo effect for nearly everything Apple and introduces droves to the Apple ecosystem. The iPod Touch is very crucial in terms of introducing those who don’t own an iPhone to the iPhone OS. The iPhone OS has made its way in 3 separate devices, and evidence indicates that it will find itself in new and future products. The iPod is still very much important to Apple in these particular ways. But in terms of direct revenue, by the end of 2011, the iPod will barely make a dent in Apple’s overall revenue.

Another Alternative Viewpoint: Like Intel Chips, iPods are in All Apple Devices

There’s another relatively strong argument put forth by a message board poster named Chano at Appleinsider. Chano contends that my article “misses the point” because iPods are embedded in several of Apple’s devices, and that this value should be counted in the analysis. Chano offers the following:

“Apple is selling more iPods today than all other products combined. Most of them are buried in the value proposition of the devices they are embedded in. I buy an iPhone because I want an iPod too. Without the iPod built in, how well would sales go? They still contribute to revenue. Embedded value is ADDED value. Intel’s chips are all embedded in something. They’re still counted in the sales value of the products they’re embedded in. It’s possible to break out a notional sales value for the embedded iPods as part of the selling price of the host device. It may be notional value but the embedded iPod is real. It should be counted.”

This is not a bad argument, and presents a stronger viewpoint than the 'iPhone is an iPod' analysis. In fact, one can extract the added value of the iPod from each iPhone sale by simply subtracting iPod ASP from iPhone ASP, and add that value to iPod revenue. Basically, one could shift a portion of iPhone revenue and add it to overall iPod revenue. This would dramatically increase overall iPod revenue thereby indicating that iPod sales are in fact significantly stronger than my article suggests.

Yet, obviously one could counter-argue that it isn’t entirely obvious just how much added value the iPod actually contributes. That unlike Intel chips which are actually sold to a device manufacturer, actually used by every consumer of the device and make up a portion of the cost of goods sold, the iPod is simply embedded as an unquantifiable software feature that may or may not be used by the consumer of the iPhone.

In this sense, unlike Intel chips which are necessarily used by the consumer by virtue of using the device, the value proposition of the iPod depends largely on the varying needs of the consumer. My parents, for example, while they own iPhones, don’t use the iPod application. For them, the value is zero. For another person, that value might be $450 – higher than the iPod ASP. So in this sense, the quantifiable value in terms of a precise dollar amount is very arbitrary making the analysis upon which the value proposition is based, equally arbitrary. Thus, this viewpoint really has no value from a financial statement analysis perspective, but should be added as a sub-analytical argument suggesting that there’s an intangible benefit of the iPod to each of Apple’s portal devices (iPhones and iPads).

Secondly, while one could try to arbitrarily break out the added revenue value from those devices, it also would be very difficult to quantify this value in terms of unit sales. It would be a gross overestimation of iPod unit sales to suggest that each iPhone or iPad sold is an iPod sale as well. Because it isn’t entirely clear how many iPods would sell if Apple only introduced the iPod Touch. In other words, there are definitely a large number of people who buy the iPhone for features other than the iPod capability. Some may like the iPhone for the applications. Some might simply like the interface. Still, others might buy the iPhone for enterprise. Thus, it isn’t clear exactly how much value is added from a unit sales perspective.

So while this viewpoint is really more of a complimentary analysis that should be added to the overall iPod analysis, the fact still remains that total iPod revenue, as defined and recorded by Apple, continues to make up an increasingly smaller portion of Apple’s overall revenue.

Andy Zaky is a graduate from the UCLA School of Law, an AppleInsider contributor and the founder and author of Bullish Cross -- an online publication that provides in-depth analysis of Apple's financial health.
post #2 of 58
Your argument seems to be that financial analysts are so incompetent that they are unable to discard arbitrary categories supplied by Apple. This could be true.

Other arbitrary bins are possible: iOS vs MacOS devices; portability (size) of devices; software vs hardware; cost; ... and Apple certainly uses an analysis internally that attributes a value to the iPod embedded in an iPhone.
post #3 of 58
I use my iPod Touch a lot. It's a few years old and works wonderfully (even after falling in the tub).

My point is this, iPods may not be selling as fast they use to (damn near everyone in the world has one already), and they work for years, so folks don't need to upgrade.

Will I get a new one, YES, when I NEED one, not when I want.

Yes, sales have slowed down

Yes they could use a change
Yes, they could build them cheaper, have them breakdown sooner, and sell more, but I like it this way.

Skip
post #4 of 58
If iPhones are iPods just because there is an iPod "in" every iPhone, does that mean all cars are radios?
post #5 of 58
It's like saying a 1930 Cadillac is a 2010 Cadillac. Neither one has anything in common except the name and 4 wheels. The iPod has simply evolved into a touch screen device and became an individual app. If there wasn't an iPod app on the iPhone then it's likely I wouldn't own an iPhone.
post #6 of 58
Well, in September we can expect a nice iPod touch update to be ala iPhone 4. Maybe with just the rear-facing camera, 3 megapixels, maybe, maybe not, does video recording... Will be nice for a flagship iPod touch to hold the iPod line for another year.
post #7 of 58
That's better than the first story, but the real status of the health of the iPod lives somewhere between the low-ball of what Apple explicitly calls iPods and the sum total of all devices that are supersets of iPods.

What will drive the bean counters crazy is figuring out what fraction of an iPhone (or iPad) is really used as an iPod. Personally, I use my iPhone primarily as an iPod, but I barely use the iPod feature on my iPad. The iPhone has completely negated any future iPod purchases, but the iPad has no such effect. Certainly there will be use cases that vary dramatically from mine, so there would need to a huge study done to see whether an iPhone should count as 10% of an iPod or 80%. This would throw some "fuzz" into the numbers that OCD analysts cannot tolerate.
post #8 of 58
My playlists are so important to me that I would not even consider buying any Apple product that wasn't also an iPod. My iPhone and iPad are iPods, and my iMac streams my entire music library to 10 speakers at once throughout the house via AirTunes, controlled by the Apple Remote app on my iPhone. Sweeeeeet.
post #9 of 58
Quote:
Originally Posted by AppleInsider View Post

(the iPod) helped Apple escape the brink of bankruptcy.

Huh? No. That would be the iMac. Review your history Andy.

It's easy to forget how much the iMac contributed to Apple's success, and to the entire computer industry. It's easy to forget how much the iMac was dismissed as irrelevant, due to its lack of a floppy disk drive It enabled a clean break from Apple's previous operating system, something that Microsoft will never be able to do, given the enormous number of legacy systems it has to support. OS X, now iOS, drives all its products today.

Today, Macs represent $10B a year in revenue, a number that continues to grow.

Quote:
It’s a device that helped drive Apple’s growth for much of the past decade.

True. Without the iPod, there would be no iPhone. But without the iMac, there would have been no iPod.
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post #10 of 58
Blah blah blah!!!!!!!!!!!!!!!!!!!!
post #11 of 58
Quote:
Originally Posted by john galt View Post

Huh? No. That would be the iMac. Review your history Andy.

It's easy to forget how much the iMac contributed to Apple's success, and to the entire computer industry.

well i guess that helped too. He didn't say it was solely responsible. Review your English, John.
post #12 of 58
The iPod is past its prime. The numbers don't lie. The iPod has found a point where there is no more room for major growth. While still very popular and still will make a good number of sales, I fail to see what else they can add to the lineup. Maybe a camera function on the Touch and Nano, but that's about it from what I can tell. Yes the Nano can record video, but it can't take any photos.

When one iPod dies, I replace it with a used iPod. For example my Product Red Nano, gen 2, was replaced with the fatboy Nano. No need for a new one if all it does is sit in my mobile transport system plugged into the stereo.
post #13 of 58
Good article again, I like the graphs and it explains things quite nicely, people are always willing to debate though.

I agree, I forsee the iPod classic being the first iPod discontinued, and it happening very soon. Apple (no matter how many music aficionado's disagree) will eventually put a cap at how much music/movies most consumers have. The iPod nano always sold more (at least during the holidays) when I worked in Apple retail and Apple always analyzes the market so well.

Funny thing is, the market is telling Apple to move to iOS. People can't stop buying iPad's, iPhone's, and iPod touch's. This is why this study is interesting, because it proves that the iPod nano, shuffle and classic don't support Apple as much as they used to. Still doesn't mean it'll be dismissed, it's still easy revenue to draw in for young kids/older individuals. However, make no mistake, iOS fits everyone. The only reason I see people against buying a young child an iPod touch is due to price.

Good article though.
post #14 of 58
I love AppleInsider, but this article reads like the garbage that has been more and more common over at BetaNews.
post #15 of 58
Regardless of the "is an iPhone an iPod" debate, looking at the figures that exclude the iPhone, I think it's incredible that they are still shifting 50 million music players per year. Into a market that's pretty much saturated, that's amazing.
post #16 of 58
Quote:
Originally Posted by ncee View Post

iPods ... work for years, so folks don't need to upgrade.

You could say the same about their computers (as I write this on my ten year old iMac).

From a marketing perspective, it's a problem. Yet Apple manages to convince enough people to upgrade to their new and shiny computers year after year. Not due to obsolescence, but merely due to the "I want it" factor.

Quote:
Originally Posted by ncee View Post

Will I get a new one, YES, when I NEED one, not when I want.

There isn't much about Apple's new computers - indeed, ANY computer - that I really need. Does anyone? Spreadsheets or documents won't load any faster. The computer doesn't limit the speed of the Internet. My iMac is too slow for streaming video, but for that I have a theater. Who wants to watch movies on a laptop when I have 100W of Earth-shaking seven channel digital surround sound?

That's what is so brilliant about the iPhones and iPad. Apple has always demonstrated an astute ability to anticipate the consumer market, and realizes the need to address the market's desire to move beyond computers, even though the market doesn't know it yet. Steve's recent remarks about this were criticized, but history has shown he's almost always right about these things. Apple was doomed for not making a netbook, to cite one recent example.
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post #17 of 58
Andy, I think much of the misunderstanding comes from separating the words "revenue" from "growth." I know you've also used them together, but every time revenue appears as a distinct concept from growth, then I think you open up an opportunity for those who don't understand the significance of their meaning together to criticize your analysis. Better yet, introduce the concept of EPS growth into the discussion. I think it's easier to understand the iPod's relative contribution to Apple's earnings growth than to express it in terms of revenue, if only because Apple is such a vastly larger company now than it was ten, or even five, years ago.
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post #18 of 58
Brilliant article on all counts, Zaky.

Quote:
Originally Posted by PaulMJohnson View Post

Regardless of the "is an iPhone an iPod" debate, looking at the figures that exclude the iPhone, I think it's incredible that they are still shifting 50 million music players per year. Into a market that's pretty much saturated, that's amazing.

No matter how you slice it, the fact that the iPod proper is still selling so well is amazing in its own right. I think there was even a 1% YoY gain last quarter.
Dick Applebaum on whether the iPad is a personal computer: "BTW, I am posting this from my iPad pc while sitting on the throne... personal enough for you?"
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Dick Applebaum on whether the iPad is a personal computer: "BTW, I am posting this from my iPad pc while sitting on the throne... personal enough for you?"
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post #19 of 58
I wonder what percentage of iPhone / iPad owners would buy the iPod app if it was not included as standard. And I wonder how much they'd be willing to pay.
post #20 of 58
All technology products eventually saturate the market or reach the peak of their technological innovation and fade. So what? That's not the issue. The issue is whether a company can react and evolve the business to meet the new marketplace. Apple has certainly proven, with the iPhone and the iPad, that it can. And my bet is that within two years, we see yet another new product category from Apple (although I have no idea what that will be).

Apple has withstood the recession better than any other company because of this. It's hard to fathom just how successful Apple would have been without the recession. As a company who tends to sell at aggressively high prices, Apple was not expected to perform well during the recession. In fact, Apple was always criticized and expected to fail because of its higher prices: yet look where Dell and Gateway (moo!) is today.

Besides, any other company in the world would love to have Apple's iPod business, in spite of the OP's contention that it's the "end of Apple's iPod era." All this means is that the strictly iPod product line will be less important in the future to Apple's total revenues, which is actually a good thing as it means that Apple is more diversified.

My guess is that we're going to see a reformulated iPod which incorporates some of the benefits of the iPhone OS and has an emphasis on video. Or maybe it becomes an iPhone that works only on WiFi and uses Skype or another service for phone calls.

As for my personal use, I was NEVER going to carry two devices. So I did not own an iPod until it became part of the iPhone. And when (if) I get the iPhone4 (waiting for the tech issues to sort themselves out), my current phone will mostly likely become an iPod for another family member or a spare.
post #21 of 58
Judging from the last refresh date it is the end of the Mac Pro era also.
post #22 of 58
Many here have completely lost the point that the rationale for Zaky's articles has been to classify Apple's business and product lines for the purpose of financial forecasting and estimation. iPods contribute a distinct revenue and margin stream in the recognition of financial results - quarterly and annual. So do iPhones, iPads, desktops, laptops and apps. None are identical; each produces different operating margin percentages. If they're commingled, analysis becomes a meaningless hash. Considered separately, it's possible to derive reasonable estimates of upcoming quarterly earnings and trends that go beyond.

Warren Buffett would only shake his head at the rank emotionalism coming out of some of these posts. His advice to those who make them would be to stay far away from the market, because they'd be making the wrong investment decisions at the wrong times for all the wrong reasons.

I admit to being a Fanatical Moderate. I Disdain the Inane. Vyizderzominymororzizazizdenderizorziz?

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post #23 of 58
A lot has to do with market saturation i think the iPOd has something like 80% market share. If someone has the exact figures let me know.

My point is if we lived in a world without iPod's and Apple some how released the iPhone and iPad, then went back a noticed a big gap filled with rubbish poorly design mp3 players, the launch of the iPod would be huge, especially if they released today's iPod's (they had beed obsessing over them for years, but not releasing them) at the same prices they are today, they would sell like hot cakes.

Still might not be the biggest asset for Apple, but demeaned would be through the roof. Anyway back to my backwards universe, where Apple is rumoured to be getting into the Personal Computer Business.
post #24 of 58
Quote:
Originally Posted by Hundo View Post

If iPhones are iPods just because there is an iPod "in" every iPhone, does that mean all cars are radios?

It does if you are counting radios.

An iPhone is not an iPod but it contains one, therefore when counting iPod sales, an iPhone *is* an iPod.

This article is talking more about sales and revenue categories, but the answer to the simple question of whether interest in iPod's is plateauing in some way is a (rather obvious) "no." You could say sales of "stand-alone" iPods is trailing off, but that's about it.
post #25 of 58
A small request to Mr. Zaky: Could you please provide just the annual numbers in your future write-ups? Currently, your presentation suffers from data overkill to the point that it is too much to process, and hence becomes useless information.

I realize that seasonality matters, but the relevance and impact of that could easily be addressed in a sentence or two in the text.
post #26 of 58
Quote:
Originally Posted by joelsalt View Post

well i guess that helped too.

Helped? When the iMac was introduced, poor beaten-down little Apple was still sitting on billions of dollars of cash and cash equivalents, with no debt. Its stock was trading a little above its cash value, with a forward P/E of 15 or so. Yet in retrospect, even iSteve characterized this period as "close to bankruptcy".

I remember this period well, since it's when I bought a huge quantity (on margin, no less ).

Apple's cash and cash equivalents were on the order of $10B when the iPod was released, with a forward P/E of 30 or so. By then, Apple was a solid company in all respects. Still, fund managers and analysts continued to characterize 30 year old AAPL as a flash in the pan, not worthy of an informed and well-managed investment portfolio.

So, I bought more. I didn't need to borrow this time

"Helped"?

I'll forgive Andy - he's probably too young to remember 1999.
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post #27 of 58
Maybe it's just me but I find the statement "In fact, the iPod Touch is arguably one of Apples most important products as that device is a gateway drug to Apples other products, so to speak" just a tad condescending. But then I thought the article was a bit overkill anyway. Whether the iPhone is considered an iPod doesn't really matter. Not everyone can afford the expensive end of the iPod line and I don't see Apple abandoning the lower cost devices anytime soon. To me it's pretty obvious that the iPod isn't the revenue stream it was 5 years ago. But there is still a strong customer base out there until all the "kids" have an iPhone. Oh, I feel a need coming on. Had better head over to the iTunes store for a quick fix.
post #28 of 58
Quote:
Originally Posted by ncee View Post

IWill I get a new one, YES, when I NEED one, not when I want.

So you have a requirement of some type (a job) to use an iPod but you don't want one?
post #29 of 58
Quote:
Originally Posted by Kibitzer View Post

Many here have completely lost the point that the rationale for Zaky's articles has been to classify Apple's business and product lines for the purpose of financial forecasting and estimation. iPods contribute a distinct revenue and margin stream in the recognition of financial results - quarterly and annual. So do iPhones, iPads, desktops, laptops and apps. None are identical; each produces different operating margin percentages. If they're commingled, analysis becomes a meaningless hash. Considered separately, it's possible to derive reasonable estimates of upcoming quarterly earnings and trends that go beyond.

Warren Buffett would only shake his head at the rank emotionalism coming out of some of these posts. His advice to those who make them would be to stay far away from the market, because they'd be making the wrong investment decisions at the wrong times for all the wrong reasons.

And ignorance.

Well Said.
post #30 of 58
Quote:
Originally Posted by BartBuzz View Post

Maybe it's just me but I find the statement "In fact, the iPod Touch is arguably one of Apples most important products as that device is a gateway drug to Apples other products, so to speak" just a tad condescending. But then I thought the article was a bit overkill anyway. Whether the iPhone is considered an iPod doesn't really matter. Not everyone can afford the expensive end of the iPod line and I don't see Apple abandoning the lower cost devices anytime soon. To me it's pretty obvious that the iPod isn't the revenue stream it was 5 years ago. But there is still a strong customer base out there until all the "kids" have an iPhone. Oh, I feel a need coming on. Had better head over to the iTunes store for a quick fix.

The point I was making above is that the iPod "revenue stream" is a deceptive concept. Taken as a gross number, iPod earnings are far greater today than they were five years ago. But taken as a percentage of Apple's earnings, the iPod is now a substantially smaller proportion. This has at least as much to do with Apple developing other sources of earnings growth as it does with earnings generated by the iPod flattening.
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post #31 of 58
The iPhone/iTouch isn't an iPod, or a phone, it's a mini computer.
post #32 of 58
Quote:
Originally Posted by Banalltv View Post

The iPhone/iTouch isn't an iPod, or a phone, it's a mini computer.

So?
The iPod touch is counted as an iPod in Apple reports and the iPhone is counted as the iPhone.
They dont have a category of "mini computers".
post #33 of 58
...Is what this should be called!!! The iPhone has cannibalized sales of the total iPod line and definitely takes sales away from the iPod Touch line within the iPod segment. If I lived in a city with horrible AT&T reception, I would have to have the iPod Touch instead of my iPhone, without a doubt.

The ONLY reason I haven't bought a new iPod since my 8GB Black nano is because I got an iPhone 3G and now I have a 4G. Those sales would have been to the iPod Touch if not for the iPhone and me living in Houston where AT&T reception is actually decent (believe it or not AT&T doesn't suck everywhere).

Perhaps an analysis to extrapolate the iPod value within the iPhone could be quantified by increased sales of music, etc. on iTunes. Obviously if people are using the "iPod" feature on the iPhone, it would be reflected in music sales. I know Apple doesn't have a lot of margin in the iTunes line compared to their hardware, but it definitely would be your starting place to see how much Apple's "iPod feature within iPhone" is selling as it relates to music/media usage!
post #34 of 58
The iPad is a giant iPod touch, and the iPod touch itself isn't really an iPod, but rather an iPhone without telephony/GPS/camera. The iPod line died with the introduction of the iPod touch, just like the old Mac OS died with the introduction of OS X. By lumping the iPod touch and iPod together, the article and its predecessor (which didn't even include the phrase "iPod touch"!) completely miss the real division.
post #35 of 58
I think it's a lot more useful to look at the universe of IOS 4 devices. I may never buy another iPod because I use an iPhone. I don't need both because they overlap in iPod functionality, but so what? Apple is getting more revenue from me because I own an iPhone. It's likely that I would only buy a convergence device because I don't want to carry around two small devices. I also own an iPad and while the functionality overlaps, there is a significant differentiation between that and other IOS 3/4 devices. Apple needs the iPad. Not everyone can or will buy an iPhone, but they still want IOS functionality.

Breaking out the iPod from the iPhone is kind of irrelevant because they are part of a continuum of devices from Apple.
post #36 of 58
Quote:
Originally Posted by Dr Millmoss View Post

The point I was making above is that the iPod "revenue stream" is a deceptive concept. Taken as a gross number, iPod earnings are far greater today than they were five years ago. But taken as a percentage of Apple's earnings, the iPod is now a substantially smaller proportion. This has at least as much to do with Apple developing other sources of earnings growth as it does with earnings generated by the iPod flattening.

Your conclusion seems obvious to me. Plus, the profit margin of those "other sources" is, most likely, larger.
post #37 of 58
Quote:
Originally Posted by bdkennedy1 View Post

It's like saying a 1930 Cadillac is a 2010 Cadillac. Neither one has anything in common except the name and 4 wheels. The iPod has simply evolved into a touch screen device and became an individual app. If there wasn't an iPod app on the iPhone then it's likely I wouldn't own an iPhone.

Whereas I'm the opposite. I've had an iPod touch for a year and a half and I've never loaded any music on it. It's all about the apps for me.
post #38 of 58
The iPod brand is no doubt weakening. When the original iPhone was introduced, the major selling point is iPod. Right now if I buy iPhone what I'm thinking about is apps, apps and game (apps).
My friend also bought iPod Touch mainly because of game. iPod in the original sense is dying.
post #39 of 58
This hasn't come up in awhile, but will it ever be a good time or Apple to expand the iPhone the way it has with the iPod, going with smaller and less sophisticated designs once a market segment becomes saturated? In other words, despite the success of the iPhone is there an untapped market for people that don't want apps, don't want dataplans and so forth on their iPhone, but instead want their simple cellphone to combine with their iPod, nothing else?
Dick Applebaum on whether the iPad is a personal computer: "BTW, I am posting this from my iPad pc while sitting on the throne... personal enough for you?"
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Dick Applebaum on whether the iPad is a personal computer: "BTW, I am posting this from my iPad pc while sitting on the throne... personal enough for you?"
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post #40 of 58
what an inane jerk who is a ucla product. calif is full of half wits.

<Apples most important products as that device is a gateway drug to Apples other products,>

to mix the word 'drug' into your treatise negates everything else you have to state. apple may have questions, but pushing drugs in any conversation, no matter how obtuse the comment, shows where your intelligence level is.
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