Apple can withstand Microsoft iPod assault - analyst

Posted:
in iPod + iTunes + AppleTV edited January 2014
Microsoft's rumored foray into the digital music business is likely to have the strongest impact on partners like Creative and Sony rather than Apple Computer and its iPod, says one analyst.



American Technology Research analyst Shaw Wu on Tuesday said the biggest issue with Microsoft entering the portable music scene is that it will pit itself against its current partners.



On Friday, Reuters cited unnamed sources in saying the Redmond, Wash.-based software maker is laying the groundwork to compete against Apple's iPod digital entertainment device and iTunes service.



"No matter what Microsoft says, this move essentially puts Microsoft in direct competition with its partners that it has worked with over the past 3 to 4 years including Creative, Sony, Samsung, Archos, Toshiba, iRiver, Philips, MTV Networks, and countless others," Wu told clients in a research note.



The analyst also questions whether Microsoft can be profitable and successful in making portable hardware. "Apple has proven the portable entertainment space is a highly competitive business where it earns the bulk of its profits with NAND flash, microdrives, and content providers also profiting," he said. "However, outside of [Apple and those suppliers], profits have been meager to non-existent."



Wu says Microsoft's biggest successes have come from pursuing its horizontal technologies like Windows, Office and SQL Server, while its vertical technologies like the Xbox have proven to be less successful money losers.



"The question is whether Microsoft is willing to fund another potential highly unprofitable business," the analyst said.



Furthermore, Wu believes the advantages of Apple's iPod+iTunes franchise are largely defendable should they come under attack from Microsoft or any other company. He pointed out that few (if any) other companies have been able to successfully execute a vertical strategy like Apple's, where the company maintains total control of the hardware, software and service.



Wu also notes that Apple retains a large install base of about 50 million iPods and 300 million iTunes users, both of which are still growing with each day. But the analyst believes iPods are just part of a broad Apple strategy, meaning Microsoft would have to enter other hardware segments, such as PCs, cell phones and home entertainment servers, if it wanted to keep up.



Wu maintains a Buy rating on Apple shares with a price target of $101.

Comments

  • Reply 1 of 18
    irelandireland Posts: 17,571member
    "Apple can withstand Microsoft iPod assault"















    I'll say that again!











    Stick to the XBox, and leave music, cool devices and (movies) to apple.
  • Reply 2 of 18
    SpamSandwichSpamSandwich Posts: 31,010member
    Quote:

    Originally posted by AppleInsider

    Wu maintains a Buy rating on Apple shares with a price target of $101.
    [ View this article at AppleInsider.com ]




    Oh, and he even raised his target a few bucks...
  • Reply 3 of 18
    I'm interested to see what a BSOD looks like on a portable media player.
  • Reply 4 of 18
    Quote:

    Originally posted by macgyver2

    I'm interested to see what a BSOD looks like on a portable media player.



  • Reply 5 of 18
    jeffdmjeffdm Posts: 12,946member
    The price target stays roughly the same (or even slightly increased) but the current price has been gradually declining for a few months from a high of around 80, I think. I wonder if they can justify it.
  • Reply 6 of 18
    arw3arw3 Posts: 8member
    MS would definitely have to answer to the DoJ. The antitrust suits would come from everywhere.
  • Reply 7 of 18
    fuyutsukifuyutsuki Posts: 293member
    Quote:

    Originally posted by AppleInsider

    Apple retains a large install base of about 50 million iPods and 300 million iTunes users, both of which are still growing with each day.
    [ View this article at AppleInsider.com ]




    6:1 ... I wonder if that's just the total number of iTunes application downloads (on Windoze you have to download a new installer for each iTunes version instead of Software Update's sweetness on OS X) or if there's some measure of unique IP's out there for browsing the iTMS say.



    Certainly I used iTunes for a couple of years before I bought an iPod. I was waiting for a flash one with a screen. Result!
  • Reply 8 of 18
    flounderflounder Posts: 2,674member
    Seriously, did AI sign a contract with Shawn Wu in blood or something?
  • Reply 9 of 18
    melgrossmelgross Posts: 31,507member
    Quote:

    Originally posted by fuyutsuki

    6:1 ... I wonder if that's just the total number of iTunes application downloads (on Windoze you have to download a new installer for each iTunes version instead of Software Update's sweetness on OS X) or if there's some measure of unique IP's out there for browsing the iTMS say.



    Certainly I used iTunes for a couple of years before I bought an iPod. I was waiting for a flash one with a screen. Result!




    It's tough to say how they figure these things. My wife, for example buys songs from iTunes, even some programs, but doesn't have an iPod yet. She's waiting for a more "video" model.
  • Reply 10 of 18
    hobbeshobbes Posts: 1,252member
    Quote:

    Originally posted by Flounder

    Seriously, did AI sign a contract with Shawn Wu in blood or something?



    Seriously. Plus this Wu guy is so optimistic it makes my teeth hurt.



    I mean, I think Apple can withstand a direct assault by MS too, but I wouldn't underestimate MS's ability to put together a well-designed and successful product when they finally grasp that they're being threatened. And make no mistake, Apple's current domination of the digital media market is an increasing threat to MS...



    I actually suspect that MS will introduce a sleek portable device that competes with the PSP, DS, as well as the iPod. An XPod if you will. So it probably won't be as a direct an attack on the iPod as some have suggested.
  • Reply 11 of 18
    jeffdmjeffdm Posts: 12,946member
    Quote:

    Originally posted by Hobbes

    I actually suspect that MS will introduce a sleek portable device that competes with the PSP, DS, as well as the iPod. An XPod if you will. So it probably won't be as a direct an attack on the iPod as some have suggested.



    I think this would be more consistent with Microsoft. Releasing a static media only device a year or so after declaring that market to be dying would mean Bill G. eating crow. I don't think Microsoft would release a player if they don't project a long term market for a dedicated portable media over some sort of converged device. There have been several rumors of a portable Xbox too.
  • Reply 12 of 18
    melgrossmelgross Posts: 31,507member
    Quote:

    Originally posted by Hobbes

    Seriously. Plus this Wu guy is so optimistic it makes my teeth hurt.



    I mean, I think Apple can withstand a direct assault by MS too, but I wouldn't underestimate MS's ability to put together a well-designed and successful product when they finally grasp that they're being threatened. And make no mistake, Apple's current domination of the digital media market is an increasing threat to MS...



    I actually suspect that MS will introduce a sleek portable device that competes with the PSP, DS, as well as the iPod. An XPod if you will. So it probably won't be as a direct an attack on the iPod as some have suggested.




    A bit under two years ago, when he wasn't as optimistic, people were complaining about him. Now that he is, people are complaining about him.



    Can't satisfy everyone.
  • Reply 13 of 18
    flounderflounder Posts: 2,674member
    Quote:

    Originally posted by melgross

    A bit under two years ago, when he wasn't as optimistic, people were complaining about him. Now that he is, people are complaining about him.



    Can't satisfy everyone.




    That's my main problem with him. He just seems to pick a direction that the wind is blowing and just hammer at it with gusto. I mean, how about some thought through, reasoned comments instead of just "Boo Boo Boo" or "Rah Rah Rah"



    That's what drives me nuts about the guy.
  • Reply 14 of 18
    mcdavemcdave Posts: 1,129member
    Quote:

    Originally posted by JeffDM

    I think this would be more consistent with Microsoft. Releasing a static media only device a year or so after declaring that market to be dying would mean Bill G. eating crow. I don't think Microsoft would release a player if they don't project a long term market for a dedicated portable media over some sort of converged device. There have been several rumors of a portable Xbox too.



    Hopefully the device will try to be too broad in application & miss the mark or be tied to Xbox & restrict it's market (though I don't think so). MS have always been good at hijacking a good idea.



    Remember, VHS won the video format war through licensing of the technology & perception of choice. Hypothetically everyone got the right unit at the right price but actually we all ended up watching crap video for the next 20 years.



    They'll use Apple's proprietary DRM to paint a picture of restriction and offer 'industry standards' & choice as a solution. Ironically their offering is neither an 'industry standard' by endorsement or by popularity but the general public will fall for it because they are MicroSoft and hence are The Industry Standard even though it's the wrong industry. Most people buy iPods not because they're the best portable digital music solution but because they're 'cool'



    Could be tougher to call than we think - McD
  • Reply 15 of 18
    recompilerecompile Posts: 100member
    [QUOTE]Originally posted by fuyutsuki

    [B]6:1 ... I wonder if that's just the total number of iTunes application downloads (on Windoze you have to download a new installer for each iTunes version instead of Software Update's sweetness on OS X) or if there's some measure of unique IP's out there for browsing the iTMS say.



    I think that all the other mp3 player owners account for the offset in numbers. Where else can they get the best online music store?
  • Reply 16 of 18
    melgrossmelgross Posts: 31,507member
    Quote:

    Originally posted by Flounder

    That's my main problem with him. He just seems to pick a direction that the wind is blowing and just hammer at it with gusto. I mean, how about some thought through, reasoned comments instead of just "Boo Boo Boo" or "Rah Rah Rah"



    That's what drives me nuts about the guy.




    I can't get to annoyed, because he, like others, have seen Apple come from a bad, and deteriorating situation, to one of significantly increased growth, profits, and attention. He feels, as all of us here do, that Apple has has a small setback during the transition, but that will change soon. Look at how the estimates for this, and next quarter are being raised.



    Apple's stock dropped much more than I expected, but, I think that part of that is due to the markets continued drop during this period as well. If Apple's Mac sales are better than expected, and the iPod sales are ok, then the stock will start to rise again. If the estimates of 500 thousand Macbook sales this quarter are correct, and next quarters sales of 900 thousand are also correct, that will be a triumph for Apple, and the stock will start to rise sharply.



    With new towers next quarter, and continued excellent MBP and iMac sales, Apple will be poised to have a VERY good holiday quarter, especially if a new iPod is introduced, possibly with movie sales, and who knows, maybe even the home theater product all have been waiting for.



    So he could be right.
  • Reply 17 of 18
    flounderflounder Posts: 2,674member
    Melgross,



    I've been suprised with how sharply apple has dropped as well. If all my extra money wasn't going to pay back my parents the money they loaned me for grad school, I'd definitely consider picking up some apple stock.
  • Reply 18 of 18
    melgrossmelgross Posts: 31,507member
    Quote:

    Originally posted by Flounder

    Melgross,



    I've been suprised with how sharply apple has dropped as well. If all my extra money wasn't going to pay back my parents the money they loaned me for grad school, I'd definitely consider picking up some apple stock.




    Yeah. When it dropped to $73, I did buy more. But, I don't want to have to sell other investments at this time to get even more.
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