“This is Apple’s big week. The company kicks off its biannual Macworld conference in San Francisco today, with CEO Steve Jobs scheduled to give his widely covered keynote address on Tuesday. On Wednesday, Apple will report its first-quarter earnings, which include the holiday season. It’s expected to be the company’s strongest quarter ever,” Eric Hellweg reports for CNN/Money. “Analysts expect sales of Apple’s groundbreaking iPod device to come in between 4.5 million and 5 million units for the quarter, up from 2 million the previous quarter. And the consensus earnings estimate has risen to 48 cents per share.”
Hellweg reports, “…Coupled with the holiday season earnings report is the rumor that Jobs will introduce a less expensive, flash-memory-based iPod and a sub-$500 iMac. Both announcements, if they pan out, would be boons for the company and its investors, as they should allow Apple to preserve its high profit margins and finally usher in the “halo effect” everyone’s talking about.”
“As to the halo effect — the belief that the rocket-fueled growth of iPod sales would spur users to buy a more margin-rich Apple computer — it’s a nice theory,” Hellweg reports. But so far, that hasn’t happened, according to IDC vice president Roger Kay. “‘I have sifted through the numbers, and there’s no evidence of [a halo effect],’ he says. ‘The iPod is two years old, and Apple’s desktop share has been absolutely flat for that period. I would applaud Apple’s introducing a sub-$500 computer. It would address the company’s one glaring weakness in its computer line — nothing on the low end.'”
Hellweg reports, “For the much-heralded halo effect to occur, Apple needs to make it easier for goo-goo-eyed iPod consumers to make impulse computer purchases. A Mac that’s almost as cheap as a Hewlett-Packard PC but that makes it easier to manipulate music and videos might be the long-awaited incentive that consumers need to switch to an Apple computer.”
Full article here.
MacDailyNews Take: To properly measure the “iPod Halo Effect,” one wouldn’t use market share numbers because such numbers would be meaningless. You’d look to see if Apple’s Mac unit sales had increased and, if they had, you’d look to see if Windows iPod owners bought those extra Macs because of their positive experiences with their Apple iPods. Apple’s iPod could help sell more Macs, but if other PC makers’ unit sales also increased as much as or more during the same time period, you would not see any “iPod Halo Effect” by looking at Kay’s “Apple’s desktop share” numbers. To top it all off, everyone knows that people buying more laptops than ever before, so why does Kay exclude iBook and PowerBook share numbers anyway, even though they wouldn’t matter? You’d think that IDC vice president Roger Kay would know better, wouldn’t you? You’re sifting through the wrong numbers there, Rog.
We do know some useful numbers, though. Apple last quarterly earning report, issued on October 13, 2004, showed that they had shipped 836,000 Macintosh units representing a 6 percent increase in CPU units over the year-ago quarter. On November 22, 2004, we reported that Piper Jaffray said that in a survey of 200 users, 6% were former PC users who have purchased a Macintosh after buying an iPod, while 7% were former PC users who plan to buy a Macintosh within 12 months. So, the “much-heralded iPod Halo Effect” really is much more than “a nice theory” and there is actually compelling evidence that it began generating Mac unit sales a quarter or more ago.
Related MacDailyNews articles:
Analyst: With growing Mac market share, Apple has to start acting like a grown-up company – December 27, 2004
Survey: 13% of iPod owners have switched, plan to switch to Mac from Windows within 12 months – November 22, 2004
Mac market share primed to explode? If not now, when? – September 25, 2004
Apple smashes earnings estimates: posts net profit of $106 million on $2.35 billion revenue – October 13, 2004