Report: sub-$200 WiFi touchscreen iPods from Apple by holidays
Investment bank Piper Jaffray said Wednesday it disagrees with the consensus on Wall Street that growth in Apple Inc.'s iPod business will screech to a halt this year, saying new products like a sub-$200 wireless touchscreen model will allow the company to grow the segment at moderate levels for the foreseeable future.
The firm's view was outlined by analyst Gene Munster in a third and final segment of his research report series on the Cupertino-based firm's "3 Cylinder Engine," in which he presented his views on the future of the iPod, its growth trajectory, upcoming models, and the latest on the Apple ecosystem.
"While we do not see the iPod business as a significant growth catalyst, we believe Apple remains positioned to slightly exceed Street estimates in 2008. Specifically, we believe the Street expects iPod unit growth to be about 53 million in 2008, essentially flat year-over-year. We disagree," he told clients. "We believe Apple can maintain iPod unit growth and slightly exceed Street expectations for the full year."
While Munster admits that it's unlikely the iPod will ever return to a high growth business of 20 percent and above, he sees growth levels of approximately 10 percent as obtainable on a yearly basis even given the possibility of an off quarter where units will reflect slightly negative growth.
The analyst advised clients that historical patterns suggest iPod growth has been stimulated by a combination of innovative new features and price reductions. To this end, he sees the upcoming release of the iPhone software developers kit (SDK) and App Store addressing the former, paving the way for dozens of new games, utilities, and productivity tools for iPod touch users.
"We note that this rapid increase in available features on the iPod touch is not speculation; Apple has indicated that the new iPod touch (and iPhone) operating system will be out by late June," he said. "Secondly, we expect Apple to release new Wi-Fi enabled, touchscreen iPods in the sub-$200 range by September. In fact, we believe the concept of the iPod will change in the next 12-18 months from a standalone music player to a mobile Internet device that fits in your pocket."
At the same time, Munster also believes Apple will continue innovate and progress in the areas of standalone music players, but sees iPod functionality as becoming significantly more diversified across price points, with the addition of the aforementioned Wi-Fi enabled models that will likely feature multi-touch technology.
"Admittedly, the exact way the product lineup will fit together remains unclear," he said, noting the difficult task facing the company in differentiating the iPod family from the iPhone family as iPod prices fall and the players increasingly gain features previously only available on the iPhone.
"With a sub-$200 Wi-Fi enabled iPod, the price-to-value equation changes in relation to the iPhone; however, we also expect Apple to release a sub-$300 iPhone in the coming months," he added.
Another challenge on Apple's part will designing these next-generation of internet ready, low cost iPods without applying too much pressure to its gross margins, which would lead to less profit on each model sold. For example, he cited a recent iSuppli report which pegs the price of the iPod touch's Wi-Fi module and touchscreen panel at a combined $45.
"For a $149 or $199 iPod, these costs apply margin pressure that will force Apple to innovate around the idea of an Internet connected iPod, which requires a larger screen than current iPod nanos, and an improved user input interface (like multi-touch technology)," he said. "We believe Apple is developing such solutions that will enable the company to deliver lower cost, Wi-Fi connected iPods in the near future. In turn, this new iPod platform should generate continued growth for the iPod segment of Apple's business."
In the short term, Munster points to the recent price cuts on the iPod shuffle as the catalyst that will allow the company to post above consensus March quarter iPod results. While the Street and an extrapolation of NPD market data trend towards flat to slightly declining unit growth, he believes units will actually see a modest boost due to the shuffle price decrease, driving 15 percent year-over-year growth on iPod shuffle ASPs of $67, overall iPod ASPs of $172, and iPod segment revenue of $1.94 billion.
"We are increasingly confident in our estimate of 11.3 million iPods in the March quarter," the analyst wrote.
The firm's view was outlined by analyst Gene Munster in a third and final segment of his research report series on the Cupertino-based firm's "3 Cylinder Engine," in which he presented his views on the future of the iPod, its growth trajectory, upcoming models, and the latest on the Apple ecosystem.
"While we do not see the iPod business as a significant growth catalyst, we believe Apple remains positioned to slightly exceed Street estimates in 2008. Specifically, we believe the Street expects iPod unit growth to be about 53 million in 2008, essentially flat year-over-year. We disagree," he told clients. "We believe Apple can maintain iPod unit growth and slightly exceed Street expectations for the full year."
While Munster admits that it's unlikely the iPod will ever return to a high growth business of 20 percent and above, he sees growth levels of approximately 10 percent as obtainable on a yearly basis even given the possibility of an off quarter where units will reflect slightly negative growth.
The analyst advised clients that historical patterns suggest iPod growth has been stimulated by a combination of innovative new features and price reductions. To this end, he sees the upcoming release of the iPhone software developers kit (SDK) and App Store addressing the former, paving the way for dozens of new games, utilities, and productivity tools for iPod touch users.
"We note that this rapid increase in available features on the iPod touch is not speculation; Apple has indicated that the new iPod touch (and iPhone) operating system will be out by late June," he said. "Secondly, we expect Apple to release new Wi-Fi enabled, touchscreen iPods in the sub-$200 range by September. In fact, we believe the concept of the iPod will change in the next 12-18 months from a standalone music player to a mobile Internet device that fits in your pocket."
At the same time, Munster also believes Apple will continue innovate and progress in the areas of standalone music players, but sees iPod functionality as becoming significantly more diversified across price points, with the addition of the aforementioned Wi-Fi enabled models that will likely feature multi-touch technology.
"Admittedly, the exact way the product lineup will fit together remains unclear," he said, noting the difficult task facing the company in differentiating the iPod family from the iPhone family as iPod prices fall and the players increasingly gain features previously only available on the iPhone.
"With a sub-$200 Wi-Fi enabled iPod, the price-to-value equation changes in relation to the iPhone; however, we also expect Apple to release a sub-$300 iPhone in the coming months," he added.
Another challenge on Apple's part will designing these next-generation of internet ready, low cost iPods without applying too much pressure to its gross margins, which would lead to less profit on each model sold. For example, he cited a recent iSuppli report which pegs the price of the iPod touch's Wi-Fi module and touchscreen panel at a combined $45.
"For a $149 or $199 iPod, these costs apply margin pressure that will force Apple to innovate around the idea of an Internet connected iPod, which requires a larger screen than current iPod nanos, and an improved user input interface (like multi-touch technology)," he said. "We believe Apple is developing such solutions that will enable the company to deliver lower cost, Wi-Fi connected iPods in the near future. In turn, this new iPod platform should generate continued growth for the iPod segment of Apple's business."
In the short term, Munster points to the recent price cuts on the iPod shuffle as the catalyst that will allow the company to post above consensus March quarter iPod results. While the Street and an extrapolation of NPD market data trend towards flat to slightly declining unit growth, he believes units will actually see a modest boost due to the shuffle price decrease, driving 15 percent year-over-year growth on iPod shuffle ASPs of $67, overall iPod ASPs of $172, and iPod segment revenue of $1.94 billion.
"We are increasingly confident in our estimate of 11.3 million iPods in the March quarter," the analyst wrote.
Comments
Realistically, for usability (typing etc.) it couldn't have a much smaller screen--maybe 90% of what the Touch has at the smallest? But it could lose the top/bottom margins and be thinner, maye 2-4GB, and thus be a lot smaller and cheaper than the Touch yet run the same apps. (But would be bigger than the current nano.) I wonder if this will happen?
If not, maybe the "nano Classic" is here to stay.
A Nano Touch would be too cool.
Realistically, for usability (typing etc.) it couldn't have a much smaller screen--maybe 90% of what the Touch has at the smallest? But it could lose the top/bottom margins and be thinner, maye 2-4GB, and thus be a lot smaller and cheaper than the Touch yet run the same apps. (But would be bigger than the current nano.) I wonder if this will happen?
If not, maybe the "nano Classic" is here to stay.
My guess is a Nano Touch is not long off. Same size, but all clear glass-like with simple touch features like scrolling...but no multi-touch like pinching since the screen is so small. Kind of too bad, since trying to navigate to the next song with a touch screen in your jacket is kind of tough.
The Shuffle would remain as the only iPod with a physical button. And I can't see that changing given it's low price point and it's intended usage.
As far as the $200 touch goes, it makes me glad I got rid of my 160GB classic when I did. It was awesome being able to carry 16,000 audio tracks, but I suspect that my new iPhone will soon be able to stream my library via Wi-Fi, or even EDGE.
A Nano Touch would be too cool.
Realistically, for usability (typing etc.) it couldn't have a much smaller screen--maybe 90% of what the Touch has at the smallest? But it could lose the top/bottom margins and be thinner, maye 2-4GB, and thus be a lot smaller and cheaper than the Touch yet run the same apps. (But would be bigger than the current nano.) I wonder if this will happen?
If not, maybe the "nano Classic" is here to stay.
My bet is that the "nano Classic"is here to stay, although maybe branded as the Sports Nano for use at the gym and running (Nike+ anyone?). I don't think it needs much more storage capacity, since I can't see (no pun) watching movies on the thing, but maybe tv shows now and then. A Nano Touch could co-exist quite easily with such a product. What surprised me was upping the storage capacity of the shuffle: I guess the "why buy just one" marketing slogan didn't work.
It amazing that you were willing to give up your 160GB Classic. You really could have kept such a large library on it. Since my music library easily fits on a 30GB iPod, I wouldn't need any player with more capacity than that. I'll keep my 5G iPod until it stops working and I might even get it upgraded with a higher-capacity battery. I really like the click wheel since I'm used to using it. I guess the touch interface is the wave of the future, but I wouldn't necessarily say it was superior for such a simple device. I'll be happy to have a streaming iPod, but I think there is still room for the traditional click-wheel iPod.
I feel a bit sad that the traditional iPod line may be dying, but the iPhone and iPod Touch will carry on. There may even be a model called the iPod Gamer which could have some dedicated control buttons (though Apple seems to be moving away from this). The iPod lineup is in such a transitional stage now. I guess Apple can go so many ways that I can't possibly envision their direction.
I'm inclined to lean toward the latter.
-Clive
My bet is that the "nano Classic"is here to stay, although maybe branded as the Sports Nano for use at the gym and running (Nike+ anyone?). I don't think it needs much more storage capacity, since I can't see (no pun) watching movies on the thing, but maybe tv shows now and then. A Nano Touch could co-exist quite easily with such a product. What surprised me was upping the storage capacity of the shuffle: I guess the "why buy just one" marketing slogan didn't work.
Personally, I have 3 iPods. The iPod Photo, the 1st gen Shuffle and the next gen Shuffle. The only one I don't use any more is the 1st gen Shuffle.
I think Apple will relase a new ipod nano touch and the current ipod nano will become the ipod nano classic. They will also release an iphone nano soon.
I agree Apple will need to broaden their offerings and soon. That 10 million phone goal is achievable with a greater price mix.
Two is that beyond the segmenting confusion as price and functionality lines blur, they already have branding and messaging challenges. The platform is called iPhone SDK but if they execute, there will be as many if not more of these devices running on iPod touch (as iPhones). It is a mouthful to have to write every reference as 'runs on iPhone and iPod touch devices' and it is certainly less crisp.
Cheers,
Mark
--
Read: Mobile Reasons for Optimism - the iPhone SDK
http://thenetworkgarden.com/weblog/2...e-reasons.html
Right idea, but missing the cuddly round edges.
Two is that beyond the segmenting confusion as price and functionality lines blur, they already have branding and messaging challenges. The platform is called iPhone SDK but if they execute, there will be as many if not more of these devices running on iPod touch (as iPhones). It is a mouthful to have to write every reference as 'runs on iPhone and iPod touch devices' and it is certainly less crisp.
--
Read: Mobile Reasons for Optimism - the iPhone SDK
http://thenetworkgarden.com/weblog/2...e-reasons.html
That would actually be a feasible indicator for this year's iPod-keynote-time: If they have any intention of making wireless iPods the new standard by the end of 2008, it's (really) likely they'll address their nomenclature for Mobile OS X at the June WWDC.
Will NAND prices allow this to happen this year?
The only thing it's missing is the home button, which would probably make it about the same size as the current fatboy (in length).
The only thing it's missing is the home button, which would probably make it about the same size as the current fatboy (in length).
Ok so..
Ok so..
Change the software to the iphone OS and add wifi and we have a winner.
Change the software to the iphone OS and add wifi and we have a winner.
I updated the image to make the home button bigger, you may wish to update that url if you wish.
If Apple comes out with a $200 32 GB iPod Touch it will sell like crazy. That would be a good price for that configuration. Please no 16GB for that price.
Comments like these are worthless... Currently, the 32GB Touch sells for $499 and the 16GB $399. And you are saying make the 32GB Touch $199?? Are you **** nuts? That won't happen for another 2+ years.