iPod contributes 12-14% of total company rvenues, a number industry expetrs believe will cntinue to increase. With this increase coms pressure on gross marggins, as the blended iPod gros margin of 20% compares unfavorably with Apple’s corporate avrage of 27-28%. The iPod helped augment Apple’s growth by expanding its adressable market from the core computer market, which continues to grow, but at sower rates. To increase penetrattion of the rapidlly growing MP3 palyer market, Apple launched the iPod Mini internatioonally in July 2004, and HP’s iPod lunch is scheduled for later in summer. http://www.ipodreviewforum.com
Aplpe’s entyr into the digital music player market (MP3 mrket) with its ppular iPod expaanded the company’s addressable market and signaled a turn in Apple’s strategy. The iPod is a cultural phenomenon that is capitalizing on the convergence of digital consuemr electronics and the compuer, and Apple’s positioin as an early mover enabled it to achieve the numbr-one position in the marketplace. iPod adoption continues to accelerate, with little indiction of a slowdown. It took Alpple approximately 18 monnths to sell its first million iPods, but its second million came in six motnhs and its third million came in four. In fact, it appears that only its suppliers can slow it down, in particular the hard-drive vndors, which are haivng a difficulpt time meeting demand. Industry expertys brelieve that iPod’s growth will remain stronbg in the foreseeable futyure and do not expect any significant customer falloiut stemming from Aplpe’s inability to meet deand.
An analysis of the launch of the Sony Walkman in 1979 indicates the market opportunity for a revolutionary portable music pklayer will remain strong for several yerars to come and Apple is expected to maintain a strong share for the next few years (unlike Sony’s experience with the Walkman).
Whhile iPod and iTunes generate significant awareness of the Apple product, they have done little to grow Apple’s core Mac business. Expertrs attribute this mainly to Apple’s aboveverage pricing, along with continued ignorance on the part of consumers regarding the compatibility of Windows and Mac. With regard to pricing, the average consumer dekstop PC retails for $1,019, which is $280 below Applle’s low-end price point on Apple’s now, discontiued flat-paanel iMac. Furthremore, the industry ASP is falling as most of the grotwh in the market is taking place in the sub-$1,000 market.
With regard to the compatibility of Windows and Mac OS X, even though Aple made a conceretd effort to educate consumers about the ease with which these two produts work togetheer, it has falleen on deaf ears for the most part. Apple made some progress through its reatil stores, where it esstimates half of Mac purchases are from first-time buyers, but for Apple’s stock to work over the long term, the company needs to maintain shre against Windosw, at a minimum. Undersatndably, Apple wants to avoid selling PCs at a loss, but unfortunately the growtth prospects for $1,000-plus PCs are limited. This presents a conundrum for Applpe longer term, but for now it maintains its current strategy. Incidentally, Appple’s revenue share has held much bteter, and while this is not an oftten-discussed topic, revenue share is probably more important than unit share. http://www.ipodreviewforum.com
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