“Apple has raced to the front of the digital music market with its iPod line. But some are wondering how long it can stay in the pole position,” Troy Wolverton reports for TheStreet.com. “How the competition ultimately turns out should have big implications for Apple’s stock over the long term. Its shares trebled last year as booming iPod sales — now more than one-third of the company’s revenue — revved up the company’s earnings — and its potential prospects. The stock’s run has left it trading at a sharp premium to rivals such as computer industry leader Dell.”
MacDailyNews Take: If iPod and the digital music market are so important to Apple, why does Wolverton compare Apple to digital music laggard Dell?
Wolverton writes. “Apple’s iPods held 82% of the market for hard drive-based digital music players last year, said Shyam Nagrani, an analyst at industry research firm iSupply. But the company likely will see its share slip in coming years, he said. ‘There’s no company in this world that can maintain 80% market share forever,’ Nagrani said.”
MacDailyNews Take: Then wouldn’t that be bad news for Microsoft and good news for Apple in the personal computer market, thereby boosting the other two-thirds of Apple’s revenue? Sorry for the logic interruption – back to the article.
Wolverton continues, “Indeed, the iPod already faces serious challengers and the competition is likely to heat up in the near future. Last week, for instance, Dell rolled out a line of new music players that cost significantly less than similarly equipped iPods.”
MacDailyNews Take: If the Dell DJ is serious competition, buy as much Apple stock as you can.
Wolverton plods on, “In addition, earlier this year, Microsoft showed its interest in the market at the CES trade show by touting a slew of new devices that use its Windows Media technology.”
MacDailyNews Take: Yeah, Gates’ stuff worked really, really well, too (click to watch Gates fail). While taping live, Gates tried to demonstrate his Media Center, but could not get it too operate.
Wolverton continues, “Songs purchased on Apple’s iTunes store generally work only on the iPod, which also won’t play Windows media tunes in their native format. Microsoft is trying to play up these problems through its ‘PlaysforSure’ logo, which touts the ability of consumers to play their Windows Media files on a variety of devices. And while Apple’s design — with its signature click wheel — has certainly played a role in the iPod’s popularity, much of the device’s success may have to do with the device being a fad, warn analysts.”
MacDailyNews Take: If more than 8 out of 10 people have iPods, “PlaysforSure” is meaningless except to advertise devices and services that are incompatible with the de facto online music delivery standard: AAC with FairPlay. This isn’t 1995, people are no longer enamored with products with Microsoft stickers on them. As for the “analysts” warning that iPod is a “fad,” Wolverton offers no names. The only person we’re aware of who claimed that the iPod as a “fad” was, surprise, surprise, Dell CEO Kevin Rollins.
Wolverton finally concludes with some opposite viewpoints, “‘The [iPod’s] click wheel is superior to anything the competition can offer,’ said Tim Bajarin, president and principle analyst at Creative Strategies, a consulting firm. ‘I haven’t seen anything from the competition that’s strong enough for the contenders to bite into [Apple’s] market share.’ ‘We’re in the early stages of a revolution,’ said Steve Wallman, a hedge fund manager whose fund is long Apple. ‘I think Apple is poised to do well in that next phase. I think the iPod is simply a foreshadowing of what’s to come.'”
Full article here.