iPod halo effect estimated at a staggering 20 percent

Posted:
in General Discussion edited January 2014
Morgan Stanley today upgrade Apple Computer to "overweight," saying it believes the Mac conversion rate within Apple?s iPod customer base is roughly double what the market currently expects.



Following the results of a survey of both iPod and non-iPod owners, Morgan Stanley analyst, Rebecca Runkle, said additional opportunities exist for Apple to follow-on sales of iPod accessories and to leverage the iPod brand into new convergence products.



iPod Halo Effect near 20%



The survey, which polled 400 consumers, found that 19% of PC iPod owners have purchased a Mac in the past year, compared to Wall Street's expectations of 10%. These results would imply two full points of global PC market share gain for Apple in 2005, from 3% to 5%, the firm said. Going forward, the firm believes the conversion rate of the iPod customer base from PC to Mac could track closer to 25%.



Of the iPod owners polled, 43% said they are considering purchasing a Mac, with 16% saying a Mac would be their first choice. "We estimate about 26% are actually likely to buy an Apple for their next computer," the firm said. An additional 15% of non-iPod owners also said they would consider a Mac for their next computer purchase.



It appears that the major factor driving PC iPod owners to the Mac has been positive experiences with the iPod. Nearly 90% of iPod owners replacing a PC with a Mac did so, in part, due to their iPod experience, the survey revealed. While 37% of the switchers said their iPod experience had a small impact in their decision to go Mac, a resounding 52% said their iPod experience strongly influenced their decision.



Hewlett-Packard Most at Risk to Apple Gains



Based on its analysis, Morgan Stanley believes that Hewlett-Packard is most at risk to Apple's share gains in the PC industry. "Only about 3% of those expecting to purchase a PC this year rank HP/Compaq as their first brand of choice," the firm said. These results pale in comparison to HP?s overall US PC market share of 20% and the aforementioned 16% of consumers who said a Mac would be their next computer of choice.



Potential for Increased Accessory Sales



The survey also found that consumers have a broader use for their iPod than other audio players. The firm sees this as an opportunity for Apple to leverage iPod accessory sales, a potential it believes the Street is underestimating. "The iPod customer base we surveyed purchased roughly 2.8 accessories to-date," Morgan Stanley analysts wrote in their report. "If we combine this purchase rate with an overage price of 15 accessories from Apple?s website ($52) it implies meaningful upside to iPod accessory revenue in our model."



Almost 50% of iPod owners said they have purchased both car connectors and power adapters for their iPods, and 44% said they own iPod cases, sleeves, or armbands. The abundance of iPod accessories appears to have aided consumers in making their iPod more a part of everyday life. The Morgan Stanley survey found that 49% of iPod owners use their iPod on a daily basis. By comparison, only 17% of consumers who own a competitive player use it every day.



The survey also found that iPod usage is more diverse than other portable audio players, with 52% of iPod owners connecting their iPod to their home stereo. Only 28% of owners of competitive players connect their music player to their home stereo, according to the survey. Likewise, the survey found that iPod users are more likely to listen to audio books, play games, and organize their contacts than owners of other MP3 players.



Leveraging the iPod Brand



In its study, Morgan Stanley found that the Apple 'iPod' brand scored higher in many respects than the 'Apple' or 'Macintosh' brands. "Given positive experience of iPod customers upon visiting the Apple store, we believe Apple has the ability to migrate the iPod brand to other product segments," the firm said. Additionally, its findings show there is consumer appetite to shift to higher functionality iPods such as the iPod photo.



While only 4% of iPod owners surveyed said they own an iPod photo, 17% said they are considering an iPod photo as their next MP3 player purchase. 42% said they'd stick with the flagship iPod offering, while 22% would rather have an iPod mini. However, only 5% of iPod owners surveyed said they were considering purchasing iPod shuffle.



Raising Estimates



Based on an iPod customer base of 18 million, Morgan Stanley is expecting a 19% iPod halo effect and increased accessory sales to boost Apple's 2005 fiscal year earnings to $1.31 a share on revenue of $16.9 billion. The firm expects Apple to earn $1.84 per share on revenues of $25.6 billion in 2006 as the iPod customer base surpasses 42 million. But if the iPod halo effect continues to swell upwards of 27% by 2006, Morgan Stanley projects Apple could see yearly revenues of nearly $30 billion.



"Regardless of where Apple chooses to leverage its brand, market share and knowledge base, the opportunity doesn?t end at audio players," the firm said.



Morgan Stanley upgraded its rating on Apple to 'Overweight' with a price target of $60.
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Comments

  • Reply 1 of 70
    m01etym01ety Posts: 278member
    One out of every four iPod users to convert to Mac? Most excellent.
  • Reply 2 of 70
    coolfactorcoolfactor Posts: 1,509member
    Absolutely awesome!!! Way to go, Apple. I was getting kinda bored with being an Apple fanatic, thinking it was just hot air, but it's articles like this that induce more excitement.
  • Reply 3 of 70
    slugheadslughead Posts: 1,169member
    Quote:

    Originally posted by m01ety

    One out of every four iPod users to convert to Mac? Most excellent.



    that's less than 1 out of 5 (19%), and it's obviously only of PC iPod users
  • Reply 4 of 70
    nagrommenagromme Posts: 2,834member
    One in five (~19%) sounds amazingly high to me--I find myself skeptical. I can see 20% in the long run as people naturally replace their current computer... or the one after that.



    But 19% have ALREADY bought Macs? If true, I'm amazed. The Mac Mini won't hurt that trend either.
  • Reply 5 of 70
    gmacgmac Posts: 75member
    Excellent news!



    I bought an iMac G5 after getting an iPod last year. And 3 other friends of mine also bought a mac from first having an iPod. The halo effect is very much real.
  • Reply 6 of 70
    malokatamalokata Posts: 197member
    This is exceptionally good news. However, a few points should come with caveats:



    1. The statistics about iPod use vs. competitive player use doesn't really tell us anything new or contrary to logic. iPod use is proving to be more diverse than with competitors not so much because of an intrinsic iPod property but because iPods are hard-drive based players and the majority of competition players on the market are not. I'll explain: since Apple virtually has a chokehold on the hard-drive digital music market, and only just recently introduced the iPod to the flash-based arena, the statistics concerning people using competitive players in their everyday life and hooking them up to stereos should be taken on the assumption that the vast majority of these players are flash-based. Who really goes to the trouble to hook up the equivalent of a few CD's to a home stereo system that already plays them (and these days probably accommodates mp3 cds)? We already know that hard-drive players have more diverse uses than flash-based players, and this statistic is telling us that again (it's a defacto comparison between hd to flash, not iPod to competition, and unfortunately it is precisely in the area of hard-drive players that Apple faces real competition right now with the fairly attractive bouquet promised by the Napster-to-go service and a competitive player).



    2. With a forward-thinking model such as this, we assume growth rates and a curve based on past adoption and popularity. With something as fickle as the consumer mindset, even while Apple keeps its products competitive and attractive, a more realistic approach would be to model off of past burgeoning markets where a phenomenon became mainstream. In these, the market generally tends toward a selectively competitive balance after a period of single-brand dominance. The competition exists right now; it's really a question of how long Apple's dominance will last before the market opens up, which could be later down the line or right now. On the other hand, it could be possible that the digital music market doesn't follow old models or rules (sort of like Apple) and all this practical stuff is just so much traditionalist slock.



    3. No one is compiling statistics on what is still a disturbing trend - the number of mac people who are switching to PCs. These folks already know the experience, many probably love it, but sadly they are forced based on price considerations and workplace constraints to make a crappy switch. Now, price constraints aren't the factor they once were, and Apple's making enterprise gains, but this is a statistic that has been steadily growing (as Apple's share has been steadily declining, though recently less so due to all of this likeable halo business).



    These are, however, pretty piddling caveats in the face of some really good news. Hey, anyone else buy their stock pre-split at $14.76? Life is good...
  • Reply 7 of 70
    bergzbergz Posts: 1,045member
    All I can say is that the switcher-swarms are going to wreak havoc at AI. Stickie implementation will be a must in order to avoid 3,000,000 threads titled "How do I uninstall programs on MAC?" "Can I still use messenger?" etc...



    Or, now that the forum organization is up in the air, a newbie FAQ forum full of stickies. When it becomes unbearable, someone's gotta post this one in Suggestions..erm Feedback.



    --B
  • Reply 8 of 70
    strobestrobe Posts: 369member
    Wow.



    BTW the HP rebrand is embarrassing. Isn't their slogan "invent"?



    Which will be the next HP "product"?



    ? The HP Air Jordan.



    ? HP iMac



    ? HP TiCalc



    ? HP Handycam



    ? HP Tyson chicken



    ...
  • Reply 9 of 70
    strobestrobe Posts: 369member
    ?_HP Grill



    ? HP Reality TV (Board members are voted off until they have a new CEO)



    ? HP Metallica



    ? HP Nerf



    OK, that's enough...
  • Reply 10 of 70
    tinktink Posts: 395member
    I'll believe it when I see it.

    And if I see it
  • Reply 11 of 70
    I do think things are looking better for Apple than they have in a long time.



    However, I like to remember that analysts are in large part the same people that brought us the tech bubble. It is now fashionable to claim Apple is doing better than everyone thinks. Herd-mentality or group-think may be in effect here. Don't get me wrong, I'd love for them to be correct.



    Just a splash of cold water on a Friday evening. Your welcome.
  • Reply 12 of 70
    sunilramansunilraman Posts: 8,133member
    Quote:

    Originally posted by bergz

    All I can say is that the switcher-swarms are going to wreak havoc at AI. Stickie implementation will be a must in order to avoid 3,000,000 threads titled "How do I uninstall programs on MAC?" "Can I still use messenger?" etc...



    Or, now that the forum organization is up in the air, a newbie FAQ forum full of stickies. When it becomes unbearable, someone's gotta post this one in Suggestions..erm Feedback.



    --B




    remember, we were all mac virgins once upon a time too you know, a lot of us had someone lead us through our first 'experiences', it was exciting yet gentle...



    also, more mac users means an increased likelyhood of chicks/babes actually participating in Ai forums (more than the current demographic of AI)



    but you have a good point, as halo effect kicks in, it would be nice to do some newbie herding/wrangling on appleinsider to manage the newbies - it should be a strategy that guides them and makes them feel welcome to the mac, yet without straining/flooding us elitist bastards (so we can go back to whining about poor GPUs, G5 powerbooks, and speculate on Apple's Tivo-killer)
  • Reply 13 of 70
    For GMac,



    Hi. I am curious if your friends are happy with their new iMacs, and did they wrestle a while with the idea to learn OSX, or did they dive right in? Did they find learning the Mac OSX a cakewalk, easy, a nuisance, or a struggle?



    I ask because I have two friends (very basic user level: email and surf) who are considering the Mac mini. I tell them that after:

    1 day, they will be functional OSX users,

    1 week, they will be comfortable OSX users,



    Am I painting too rosy a picture for them?
  • Reply 14 of 70
    strobestrobe Posts: 369member
    Quote:

    Originally posted by Apple3.14

    For GMac,



    Hi. I am curious if your friends are happy with their new iMacs, and did they wrestle a while with the idea to learn OSX, or did they dive right in? Did they find learning the Mac OSX a cakewalk, easy, a nuisance, or a struggle?



    I ask because I have two friends (very basic user level: email and surf) who are considering the Mac mini. I tell them that after:

    1 day, they will be functional OSX users,

    1 week, they will be comfortable OSX users,



    Am I painting too rosy a picture for them?




    Depends how stupid they are.



    I bought a friend an iBook and she picked it up immediately.
  • Reply 15 of 70
    sunilramansunilraman Posts: 8,133member
    Quote:

    Originally posted by Apple3.14

    For GMac,



    Hi. I am curious if your friends are happy with their new iMacs, and did they wrestle a while with the idea to learn OSX, or did they dive right in? Did they find learning the Mac OSX a cakewalk, easy, a nuisance, or a struggle?



    I ask because I have two friends (very basic user level: email and surf) who are considering the Mac mini. I tell them that after:

    1 day, they will be functional OSX users,

    1 week, they will be comfortable OSX users,



    Am I painting too rosy a picture for them?




    1 month, they will be converted switchers
  • Reply 16 of 70
    matsumatsu Posts: 6,558member
    Be warned, this 'could' be like the Blue Jays winning the world series: step one in the demise of the franchise...
  • Reply 17 of 70
    bergzbergz Posts: 1,045member
    Quote:

    Originally posted by sunilraman

    remember, we were all mac virgins once upon a time too you know, a lot of us had someone lead us through our first 'experiences', it was exciting yet gentle...



    Hey, I'm constantly posting idiot questions that would make you think I was the typical virgin who didn't know where the cum.apple.clit.peelist was. But only AFTER searching, instructions for which should be the NUMBER ONE stickie. When I search, I find tangential shite I never would have picked up on with a straight-away post.



    --B
  • Reply 18 of 70
    sunilramansunilraman Posts: 8,133member
    Quote:

    Originally posted by bergz

    Hey, I'm constantly posting idiot questions that would make you think I was the typical virgin who didn't know where the cum.apple.clit.peelist was.........



    omigod... ROFLMAO... your post is so "wrong" but so funny on sooooo many levels



    yes, a clit is sometimes as hard to find as a bloody .plist file and vice versa





    ....rant

    on a serious note though, let me just say that when i did finally enjoy intimacy with a woman, i realised the so called 'sex education' in my *religious* high school was all about scaring us and making us feel guilty and making us think that sex is wrong and evil and bad

    </rant>
  • Reply 19 of 70
    slugheadslughead Posts: 1,169member
    Quote:

    Originally posted by strobe

    BTW the HP rebrand is embarrassing. Isn't their slogan "invent"?



    HAHA OMG LOLz.



    Too bad HP was #4 on the USPTO ANNUAL LIST OF TOP 10 ORGANIZATIONS RECEIVING MOST U.S. PATENTS:

    http://www.uspto.gov/main/homepagenews/bak11jan2005.htm



    Apple wasn't even on the list!



    Yeah so I guess their slogan should be "invent."



    for the record:

    1. IBM

    2. Matsushita

    3. Canon

    4. HP

    5. Micron

    6. Samsung

    7. Intel

    8. Hitachi

    9. Toshiba

    10. Sony



    I love it when people find out Apple's competing with someone and immediately try to defam their company. Hilarious, really.
  • Reply 20 of 70
    nagrommenagromme Posts: 2,834member
    Quote:

    Originally posted by Malokata

    No one is compiling statistics on what is still a disturbing trend - the number of mac people who are switching to PCs.



    You're right, I don't have those stats. Apple probably does



    But I feel very certain that is NOT the trend.



    Cost doesn't "force" many people to stop using Macs--they cost less in the long run due to numerous factors. (Less need for support, lower failure rates, longer usable life, no need for antivirus software, etc.) Many Macs even cost less out of the box than fast-selling name-brand PCs... especially once you add the little extras and bundled software than PC makers tend to omit. And need I mention the Mac Mini as a way to afford a Mac?



    Workplace constraints might indeed force some people to buy a PC with their own money to use for their employer. But that's not likely to make them give up their Mac.



    In short, real live Mac-to-PC switchers must exist. But they're a pretty rare breed compared to the reverse
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