Merrill Lynch: iPod shuffle demand to outstrip supply
In a research note sent to clients today, Merrill Lynch analyst Steve Milunovich said his firm has been testing Apple's new iPod shuffle over the last week and believes it will be met by strong demand, likely exceeding the 0.5-1.0 million units most firms have modeled the company to sell during the quarter.
"Every extra 500,000 units could add $62.5 million" in revenue or about a penny to the company's earnings per share for the quarter, the analyst said. The firm also believes that demand for the new players will outstrip the available supply, which is believed to be in the arena of 1.2 to 1.5 million units per quarter.
In testing the iPod shuffle, Merrill Lynch notes that one area of concern has been the download speeds. "Our tests show the key is to use AAC compression in combination with either USB 2.0 or Firewire 400. In typical usage, iPod shuffle download times should run 6 minutes (USB 2.0) to 18 minutes (USB 1.1). The worst case iPod shuffle scenario (using AIFF over USB 1.1) ran over 200 minutes on a low-end machine due to conversion time but only 19 minutes on a high-end machine."
From its experiences with the shuffle, the firm suggests the player will see strong demand from novices and new-to-iPod users, while existing iPod owners may prefer the larger capacity and display of existing iPods. "New-to-iPod users tell us the price points ($99 and $149) and ease of use are attractive," the firm said.
Merrill Lynch reiterated its 'Buy' rating on AAPL with a price objective of $85 per share, noting that Apple's net cash per share represents one-quarter of the company's market cap.
The firm cites poor execution, an absence of compelling new products, lack of PC share gain, and increased iPod competition as some of the risks associated with investing in the iPod maker.
"Every extra 500,000 units could add $62.5 million" in revenue or about a penny to the company's earnings per share for the quarter, the analyst said. The firm also believes that demand for the new players will outstrip the available supply, which is believed to be in the arena of 1.2 to 1.5 million units per quarter.
In testing the iPod shuffle, Merrill Lynch notes that one area of concern has been the download speeds. "Our tests show the key is to use AAC compression in combination with either USB 2.0 or Firewire 400. In typical usage, iPod shuffle download times should run 6 minutes (USB 2.0) to 18 minutes (USB 1.1). The worst case iPod shuffle scenario (using AIFF over USB 1.1) ran over 200 minutes on a low-end machine due to conversion time but only 19 minutes on a high-end machine."
From its experiences with the shuffle, the firm suggests the player will see strong demand from novices and new-to-iPod users, while existing iPod owners may prefer the larger capacity and display of existing iPods. "New-to-iPod users tell us the price points ($99 and $149) and ease of use are attractive," the firm said.
Merrill Lynch reiterated its 'Buy' rating on AAPL with a price objective of $85 per share, noting that Apple's net cash per share represents one-quarter of the company's market cap.
The firm cites poor execution, an absence of compelling new products, lack of PC share gain, and increased iPod competition as some of the risks associated with investing in the iPod maker.
Comments
18 Minutes over USB 1.0 might sound a little slow, but
remember you'll need to leave the iPod Shuffle connected longer than that to charge the battery.
I doubt any user would be bothered by this transfer time.
According to Apple's support site:
http://docs.info.apple.com/article.html?artnum=300464
AIFF is not a supported format on an iPod shuffle. If that's true, what is the ML analysts doing?
->Paul
Originally posted by PaulBII
I'm confused by the statement about transferring an AIFF file to an iPod shuffle.
According to Apple's support site:
http://docs.info.apple.com/article.html?artnum=300464
AIFF is not a supported format on an iPod shuffle. If that's true, what is the ML analysts doing?
->Paul
And surely 512Mb / 1Gb of music is going to transfer in the same time regardless of the format??
Anyone read the last paragraph in the article?
"The firm cites poor execution, an absence of compelling new products, lack of PC share gain, and increased iPod competition as some of the risks associated with investing in the iPod maker."
An absense of compelling new products???
You're right, we should just turn our heads and look at the compelling pieces of crap being put out by Dell, HP, Gateway... geez.
iMac G5 not compelling?
entire iPod lineup?
Their incredible software?
Originally posted by PaulBII
I'm confused by the statement about transferring an AIFF file to an iPod shuffle.
According to Apple's support site:
http://docs.info.apple.com/article.html?artnum=300464
AIFF is not a supported format on an iPod shuffle. If that's true, what is the ML analysts doing?
->Paul
That whole paragraph was confusing. The Shuffle also doesn't support FireWire. The term "downloading" didn't help much either. As far as transfer rates, the compression used doesn't make a difference at all .5 GB and 1 GB data will transfer at the same rate regardless of how it's compressed. I think he was trying to say that if you went directly from CD to your Shuffle, the songs themselves will transfer faster if compressed as AAC, but while most people will use the AAC default for ripping their CDs, I doubt most people will go straight from CD to the Shuffle as opposed to creating playlists in iTunes.
I do think he's right that demand will be higher than expected. The Shuffle is going to be *very* popular based on the fact that:
1) Price per MB, it's one of the cheapest players on the market.
2) It's the least expensive player that works with iTunes and iTMS.
3) Every customer becomes a walking billboard with a Shuffle on a lanyard hanging around their necks.
Originally posted by PaulBII
I'm confused by the statement about transferring an AIFF file to an iPod shuffle.
According to Apple's support site:
http://docs.info.apple.com/article.html?artnum=300464
AIFF is not a supported format on an iPod shuffle. If that's true, what is the ML analysts doing?
->Paul
A preference in the Shuffle allows it to compress songs into AAC only when downloaded to the iPod. So if you were listening to, say, Apple Lossless files on you Mac, you could have iTunes automatically downsample them when putting them onto the Shuffle. Cool feature, but of course the compression takes time.
Originally posted by macslut
1) Price per MB, it's one of the cheapest players on the market.
Good post, but I want to qualify this statement - price per MB, it's one of the cheapest FLASH players on the market. The other iPods have far, far better price to MB ratios, not to mention other hard-drive mp3 players.
iPod 40 GB, $399 ~ $10 per GB
iPod photo 60 GB, $599 ~ $10 per GB
iPod photo 40 GB, $499 ~ $12 per GB
iPod 20 GB, $299 ~ $15 per GB
iPod mini 4 GB, $249 ~ $60 per GB
iPod shuffle 1 GB, $149 ~ $150 per GB
iPod shuffle 512 MB, $99 ~ $200 per GB
Originally posted by D.J. Adequate
A preference in the Shuffle allows it to compress songs into AAC only when downloaded to the iPod. So if you were listening to, say, Apple Lossless files on you Mac, you could have iTunes automatically downsample them when putting them onto the Shuffle. Cool feature, but of course the compression takes time.
That's a feature I requested for iTunes.
It would be cool if this was available for the other iPods as well and if it let you choose the file format and compression rate.
Originally posted by BRussell
Good post, but I want to qualify this statement - price per MB, it's one of the cheapest FLASH players on the market. The other iPods have far, far better price to MB ratios, not to mention other hard-drive mp3 players.
Ooops, yes, you are correct, I should've specified that.
Originally posted by RolandG
That's a feature I requested for iTunes.
Me too. It's nice to see Apple responding to feedback for once.
somebody's been having fun over at merrill lynch....
Originally posted by AppleInsider
The worst case iPod shuffle scenario (using AIFF over USB 1.1) ran over 200 minutes on a low-end machine due to conversion time but only 19 minutes on a high-end machine."
what idiot user would actually do this more than once, if at all?
Originally posted by macslut
.....
3) Every customer becomes a walking billboard with a Shuffle on a lanyard hanging around their necks.
totally. its gonna be like in the past few years when i started noticing more and more people with WHITE headphones and headphone wires...
initially i was like, whoa... could it be that so many people are getting iPods, from APPLE, the NICHE player? i was like, nah... maybe their discmans or somethin...
then after a while i was like, right on....!
and then i got me a iPod mini a few months ago, me first iPod (been a Mac user for, oh, on and off for 20 years, fully on for the past 5 years)
Originally posted by AppleInsider
In testing the iPod shuffle, Merrill Lynch notes that one area of concern has been the download speeds.
Basically its "Hey, I know. Let's get the company to buy an iPod shuffle for "research" purposes. And then we can 'test' it out and see how it performs. Yeah, yeah, that's it! Oh, and we should get one for everyone, so we can 'test' it on different computers!"
I wonder if ML goes out and tests all those Dell Djs and iRiver devices too?
Originally posted by Louzer
Basically its "Hey, I know. Let's get the company to buy an iPod shuffle for "research" purposes. And then we can 'test' it out and see how it performs. Yeah, yeah, that's it! Oh, and we should get one for everyone, so we can 'test' it on different computers!"
I wonder if ML goes out and tests all those Dell Djs and iRiver devices too?
"Uhmm... er... yeah boss, we now need to research how you can stack 5 mac minis together like in the picture on the website... um yeah.... research..."
Originally posted by Louzer
Basically its "Hey, I know. Let's get the company to buy an iPod shuffle for "research" purposes. And then we can 'test' it out and see how it performs. Yeah, yeah, that's it! Oh, and we should get one for everyone, so we can 'test' it on different computers!"
I wonder if ML goes out and tests all those Dell Djs and iRiver devices too?
Or else, maybe in Cupertino they're saying, "Hey, let's send these ML people a couple of iPods so they'll write a favorable analysis".
Originally posted by erbium
absense of compelling new products???
You're right, we should just turn our heads and look at the compelling pieces of crap being put out by Dell, HP, Gateway... geez.
iMac G5 not compelling?
entire iPod lineup?
Their incredible software?
Well, I guess the "abscence of compelling new products" means PowerBook G5, faster PowerMacs etc... things we've all been awaiting for many months.
Greetings,
durandal
Originally posted by macslut
3) Every customer becomes a walking billboard with a Shuffle on a lanyard hanging around their necks.
Maybe that's true of the USA but here in Europe, very few people would wear it. Anyway, the white headphones are enough anyway.
Originally posted by D.J. Adequate
A preference in the Shuffle allows it to compress songs into AAC only when downloaded to the iPod. So if you were listening to, say, Apple Lossless files on you Mac, you could have iTunes automatically downsample them when putting them onto the Shuffle. Cool feature, but of course the compression takes time.
That's exactly the feature I've been after for my phone. I keep two libraries, one normal iTunes and one in 64kbps OGG format for my phone (a Sony Ericcson p910 with 512KB memory stick). it'd be very cool if they extended the shuffle downsampling to other players and phones.