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Growth potential seen in steadily maturing iPod market

post #1 of 23
Thread Starter 
Though growth in Apple's iPod unit shipments has been declining since the end of 2006, price cuts like those applied to the iPod shuffle on Tuesday and cheaper Internet-capable models down the line should help the company reverse course and maintain a steady rate of growth through 2009, says one Wall Street analyst.

In a note to clients on Wednesday, Piper Jaffray analyst Gene Munster noted that Apple was able to maintain the price of its third-generation iPod shuffle players for over 500 days, more than twice as long as the previous price levels which lasted only about 200 days.

The price cut (38 percent) on the 1GB model (to $49) and introduction of a 2GB model at $69 will result in the average selling price (ASP) of the shuffle line falling from $67 to $55, Munster estimated. Assuming no change in his shuffle unit estimate for the current March quarter, the analyst believes segment revenue would increase 12 percent year-over-year compared to his current estimate of 15 percent.

"However, we believe unit numbers will see a modest uptick due to the price decrease," he wrote. "As a result, we are increasingly confident in our estimate of 11.3 million iPods in the March quarter."

Additionally, Munster said he believes that even a modest uptick in shuffle units would neutralize the impact of the price cut on iPod ASPs and overall iPod revenues. Apple's iPod business should also see help from "cheaper, innovative iPods with Wi-Fi and multi-touch technology" in the not too distant future.

These assumptions and others lead the analyst to remain bullish on shares of the Cupertino-based electronics maker, which he rates a Buy with a $250 price target. He's now modeling Apple to sustain an average iPod unit shipment growth rate of 15 percent through fiscal 2009, compared to the 5 percent reported for the most recent December quarter and an estimated 7 percent for the current quarter.
post #2 of 23
I'm depressed
post #3 of 23
Quote:
Originally Posted by Sedicivalvole View Post

I'm depressed

Oh dear. Can I help?
post #4 of 23
"Though Apple's iPod unit shipments have been declining"

Have they? I thought unit shipments were still increasing but the rate of growth was declining.

Or did I remember that wrong?
post #5 of 23
Quote:
Originally Posted by minderbinder View Post

"Though Apple's iPod unit shipments have been declining"

Have they? I thought unit shipments were still increasing but the rate of growth was declining.

Or did I remember that wrong?

No, you're remembering right. Check out the graph...

Analysis: Inside Apple's iPod sales figures

The article is talking about a decline in growth. But iPod shipments are still growing. It would be nice if people would try and be more clear when they write articles like this. Minderbinder's mistake is an easy one to make, and he's not the only one who will make that mistake reading this article. A single clarifying remark on the part of the author would avoid such things. Just a thought.

(Is that a copy-and-paste quote, by the way, minderbinder? Because if it is, then you're completely right, and the article has since been edited. Now it says that growth has been declining)
post #6 of 23
Quote:
Originally Posted by Sedicivalvole View Post

I'm depressed

"...which he rates a Buy with a $250 price target..." make me happy.

Quote:
Originally Posted by Ronbo View Post

The article is talking about a decline in growth. But iPod shipments are still growing. It would be nice if people would try and be more clear when they write articles like this. Minderbinder's mistake is an easy one to make, and he's not the only one who will make that mistake reading this article. A single clarifying remark on the part of the author would avoid such things. Just a thought.

It's unfortunate that I've seen no analyst at least mention the iPhone's involvement in the iPod's ebbing.
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post #7 of 23
The 160GB iPod was all I wanted, and now that I have it, I wouldn't want anything else in an iPod.

But...

Now I want one of those "internet device" thingies. I'll probably be buying an iPod Touch soon.

I already have a 1GB 2nd gen Shuffle, and don't feel the need for updating that (and I actually never ever use the thing any more)...

And...

I've alreaady bought a Nike+iPod kit, and I'm waiting for delivery. I can use my wife's 2nd Generation Nano for a while, but I'll probably be buying a new nano soon.

I think Apple still has plenty of potential for sales with their current lineup.
post #8 of 23
Quote:
Originally Posted by solipsism View Post

It's unfortunate that I've seen no analyst at least mention the iPhone's involvement in the iPod's ebbing.

It's hard to know how someone could approach this properly, though. I know of some people with iPhones who don't seem to use it as an iPod. Personally, I do. The iPod aspect of it is probably 95% of what I use it for.

So should you count iPhones in with iPods or count them separately. If you count them in, you make one kind of error; if you count them out, you make another.

Such an analysis might be an interesting read, but I bet you and I would find more frustration than enlightenment.
post #9 of 23
The article does say growth now. Maybe it didn't before...

Regardless, I've seen many stories that misrepresent this. Some say "sales are declining" when they mean sales growth is declining. Makes me nuts because it's a huge difference.

You have to wonder if it's someone writing to get a headline or just sloppy writing. I'd hesitate to accuse Munster of either. But the writers on Seeking Alpha are both sloppy and irresponsible. Along with Philip Elmer Dimwitt.
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post #10 of 23
Quote:
Originally Posted by Ronbo View Post

It's hard to know how someone could approach this properly, though. I know of some people with iPhones who don't seem to use it as an iPod. Personally, I do. The iPod aspect of it is probably 95% of what I use it for.

So should you count iPhones in with iPods or count them separately. If you count them in, you make one kind of error; if you count them out, you make another.

Such an analysis might be an interesting read, but I bet you and I would find more frustration than enlightenment.

They should present their projected iPod numbers and then also present the number or percentage of iPhones they think are replacing iPods.
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post #11 of 23
Quote:
Originally Posted by Ronbo View Post

No, you're remembering right. Check out the graph...

Analysis: Inside Apple's iPod sales figures

The article is talking about a decline in growth. But iPod shipments are still growing. It would be nice if people would try and be more clear when they write articles like this. Minderbinder's mistake is an easy one to make, and he's not the only one who will make that mistake reading this article. A single clarifying remark on the part of the author would avoid such things. Just a thought.

(Is that a copy-and-paste quote, by the way, minderbinder? Because if it is, then you're completely right, and the article has since been edited. Now it says that growth has been declining)

That was a copy and paste quote - not a mistake on my part, looks like the article was wrong before and was corrected. Good to see the correction, although it would be nice to see the correction mentioned so responses to the original version make sense.
post #12 of 23
Quote:
Originally Posted by solipsism View Post

It's unfortunate that I've seen no analyst at least mention the iPhone's involvement in the iPod's ebbing.

More interesting would be Apple to state iPhone (family) unit shipments and iPod Touch (family) unit shipments, since those are much more similar than the iPods themselves. I cannot see someone dithering between a shuffle vs. an iPhone, so I don't think that is all that relevant. You can do the math yourself for your own analysis of iPhone vs iPod, just add in the iPhone units to the total iPod units and compare y-o-y or sequential growth/decline if that's what you want (don't know how interesting that would be, but that's just me).
post #13 of 23
Hang on, these analysts are saying that price cuts can actually increase growth? NO! they are insane! thats not possible! Is it????? Maybe Mr. Steve will read this article.
post #14 of 23
Quote:
Originally Posted by David Stevenson View Post

More interesting would be Apple to state iPhone (family) unit shipments and iPod Touch (family) unit shipments, since those are much more similar than the iPods themselves. I cannot see someone dithering between a shuffle vs. an iPhone, so I don't think that is all that relevant. You can do the math yourself for your own analysis of iPhone vs iPod, just add in the iPhone units to the total iPod units and compare y-o-y or sequential growth/decline if that's what you want (don't know how interesting that would be, but that's just me).

I don't make for a good test subject on my own.

I replaced my Nano for an iPhone and a Shuffle. The iPhone for around town usage and the Shuffle for the gym, whereas before the Nano was used for both. So, in my case, Apple went from $250 to $480 almost doubling their gross and doubling their unit sales PMPs or maintaining their PMP growth if you count only items with the iPod moniker.
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post #15 of 23
Quote:
Originally Posted by solipsism View Post

It's unfortunate that I've seen no analyst at least mention the iPhone's involvement in the iPod's ebbing.

Is it really involved? How many iPod owners just traded up to an iPhone? I think most already had an iPod of some sort. Would those owners have bought another iPod anyway? Those that activate would be giving Apple maybe $10/mo on top of the price of the device.

I would say that the iPhone compliments the iPod line far more than it might be a detriment.
post #16 of 23
Quote:
Originally Posted by JeffDM View Post

Is it really involved? How many iPod owners just traded up to an iPhone? I think most already had an iPod of some sort. Would those owners have bought another iPod anyway? Those that activate would be giving Apple maybe $10/mo on top of the price of the device.

I would say that the iPhone compliments the iPod line far more than it might be a detriment.

You could be very well be correct, but from my POV the iPhone has replaced an iPod. Not just for me, but for several of my freinds.
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post #17 of 23
Quote:
Is it really involved? How many iPod owners just traded up to an iPhone? I think most already had an iPod of some sort. Would those owners have bought another iPod anyway? Those that activate would be giving Apple maybe $10/mo on top of the price of the device.

Even though at this point its not a large degree. The iPhone will have some effect on iPod sales. iPods don't last forever and I know people who have bought second or third ones. I would've probably bought a new iPod this year or next had it not been for the iPhone. Now I doubt I will ever buy another iPod again.

MP3 player sales will eventually wane as music enabled phones will over take them.
post #18 of 23
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post #19 of 23
Quote:
Originally Posted by TenoBell View Post

Even though at this point its not a large degree. The iPhone will have some effect on iPod sales. iPods don't last forever and I know people who have bought second or third ones. I would've probably bought a new iPod this year or next had it not been for the iPhone. Now I doubt I will ever buy another iPod again.

MP3 player sales will eventually wane as music enabled phones will over take them.

I think that one of the biggest variables here is whether Apple is successful turning the touch line into the mainstream Wi-Fi platform that they aspire it to be. If they do -- a big if -- they could see slower unit growth but higher ASP/profits per unit. A lot has to go right here, which I have recently blogged about from perspective of user and from developer perspective (in anticipation of SDK). Check out the post if interested:

iPod touch: Take two -- http://thenetworkgarden.com/weblog/2...ouch-take.html

Cheers,

Mark
post #20 of 23
Quote:
Originally Posted by OriginalMacRat View Post

AppleInsider, please STOP the pop under ad windows!

Yes, I second (and third) that.
post #21 of 23
Quote:
Originally Posted by walshbj View Post

The article does say growth now. Maybe it didn't before...

Regardless, I've seen many stories that misrepresent this. Some say "sales are declining" when they mean sales growth is declining. Makes me nuts because it's a huge difference.

You have to wonder if it's someone writing to get a headline or just sloppy writing. I'd hesitate to accuse Munster of either. But the writers on Seeking Alpha are both sloppy and irresponsible. Along with Philip Elmer Dimwitt.

Too right, there is a lot of (paid off) bed press going against Apple. And I mean bed press with an 'e' as going to bed with someone who pays for it. Whore journalism.

It has even come to my mind that they probably play the stock game deflating the stock as much as possible to buy it and make for bigger 'come back' profits. However, I have seen them being detrimental to Apple / AAPL even in such occasions. In which case would make them stupid AND dishonest. That wouldn't surprise me...
post #22 of 23
Quote:
Originally Posted by minderbinder View Post

That was a copy and paste quote - not a mistake on my part, looks like the article was wrong before and was corrected. Good to see the correction, although it would be nice to see the correction mentioned so responses to the original version make sense.

I have seen too many 'mistakes' like this in AI lately, a few times even what can be classified as bad press, i.e. negatively biased / distorted articles [most the times, these can't be classified as news].

I have noticed this since the availability of the iPhone.

A change of heart from the editors/founders of AI?

One of the reasons I have been a faithful reader of AI so far is its apparent exemption. But that has been changing, maybe they've gotten contaged by the anti-AAPL epidemic out there.

Whether or not that's true, it should be erradicated. It is lack of professionalism. As the lack of the "edited" note is.
post #23 of 23
Quote:
Originally Posted by TenoBell View Post

MP3 player sales will eventually wane as music enabled phones will over take them.

YES, the whole iPod thing is already in the process of being replaced by handheld computer devices in the line of iPod Touch.

Maybe Steve, in reaction to market changes, will anticipate that inevitable 'revolution' and launch the devices sooner, thus going for lower sales/higher profits and making the business model less sensitive to consumer retraction.

Maybe he'll even set that new class of devices with a new name: MacPod? TouchPod?

[But still I will hardly be interested in such devices if they come without EDGE/3G or at least a mic for Skype on WiFi]

Whatever he does, he has to be careful to minimise making iPods feel passé thus making people drop the iPod altogether - if he can, that is, because that feeling will inevitably come when (not if) he launches all those amazing TouchPods [speculation: already in test phase?] we all crave.

Does Munster know anything about this? Unless he is a complete nutter, why else would he keep AAPL's target at $250?
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