“The iPod is a raging success–but not the rest of Apple. By some estimates Apple, now at $11.9 billion in market value, would be worth $15.1 billion broken up, jettisoning the Macintosh business. In a Microsoft-dominated world, Mac’s share is down to a scant 2%, and the business is valued at less than one-half times sales, one-fourth the level at Dell,” Victoria Murphy writes for Forbes.
“Then again, Apple stock has doubled in two years and trades at 37 times projected earnings (versus 25 at Dell). That owes mostly to the iPod. In the past year iPod sales have more than doubled to $890 million, 12% of total sales and roughly 30% of Apple’s $247 million in earnings before taxes, interest and nonrecurring items. (Song sales at iTunes are near $90 million a year),” Murphy writes. “But the bet on iPod is a risky one. Many stores run out of the popular Mini iPods, and Apple can’t say when supply will catch up. New music players from the likes of Dell, Sony, Gateway, Creative Labs and Rio are set to launch before Christmas, some at a lower price than iPod’s $249 Mini. Creative’s device has longer battery life, and the Singapore firm is shamelessly emulating the iPod’s white earphones and sleek design.”
Murphy writes, “Already Apple’s margins on the music players are shrinking. The iPod’s operating margins peaked at 13% in December and, since then, have fallen a jolting five points. (These are estimates. Apple doesn’t break out profits by product line.) The gadget’s price is down so much this year that Apple will have to sell 20% more iPods next year to maintain profits; no problem, as analysts expect a 70% rise.”
Full article here.