“The torrid gains from iPod sales may soon be a thing of the past. Is there something new in the pipeline to stoke growth? As Apple Computer prepares to announce third-quarter earnings July 13, there’s a growing sense even among the company’s most avid fans that the iPod party is ending. Yes, some analysts are predicting a quarterly revenue number slightly higher than Wall Street’s consensus of $3.3 billion, but few are predicting any new blowouts,” Sarah Lacy writes for BusinessWeek.
Lacy writes, “The consensus among analysts is that iPod sales compared to the previous quarter will be flat, at roughly 5 million units. From a device that has boosted Apple’s revenues 148% since 2001, signs of a plateau are clear. Come January, 2006, Apple investors had best beware. With every passing quarter, the company that set the music world on fire with the iPod is in greater need of an encore, most analysts who cover the company believe. Computers likely won’t pick up the slack. Mac sales are expected to grow 26% in 2005, then slow to just a 6% pace in 2006, according to Goldman Sachs. And iPod’s sales growth is expected to cool from a sizzling 234% in 2005 to just 18% in 2006.”
Full article here.
MacDailyNews Take: Remember, The Street really only cares about growth. Of course, Apple has more than a decent chance of coming up with an innovative product to ignite growth; this is, after all, the company that has already changed the world three times (Apple II, Mac, iPod). Do not underestimate the Mac. The growth potential for the Mac platform is enormous.
Related MacDailyNews articles:
Wall Street wants to see Apple grow iPod unit sales – July 13, 2005
Report: Apple to benefit from Intel chip switch; Mac sales on the rise – July 13, 2005
Comprehensive survey shows ‘iPod Halo Effect’ is increasing Apple Mac sales, market share – July 12, 2005
Smartmoney.com article sounds stupid about Apple’s ‘iPod Halo Effect’ – July 12, 2005
SG Cowen survey shows evidence of a significant iPod halo effect boosting Apple Mac sales – July 12, 2005
Analysts expect Apple to post $3.33 billion in revenue for Q3-2005 on July 13 – July 07, 2005
Merrill Lynch: Mac sales ‘appear robust,’ expects futher evidence of ‘iPod Halo Effect’ – July 07, 2005
BofA raises Apple earnings estimates, forecasts 5.4 million iPods, 28-percent Mac growth for quarter – July 07, 2005
TheStreet.com dubiously concludes that iPod demand has slowed, could impact Apple earnings – July 06, 2005
J.P. Morgan raises Apple estimates based on ‘more optimistic’ Mac shipments – July 05, 2005
First Albany raises Apple earnings, sales, iPod forecasts, cuts Mac mini forecast – July 05, 2005
Apple to webcast third quarter 2005 financial results conference call on July 13 – July 05, 2005
RealMoney: Apple’s iPod Halo Effect ‘quite profound,’ Macs taking good market share from Wintel – June 27, 2005
Morgan Stanley: Apple’s ‘iPod Halo Effect’ is ‘roughly double what the market expects’ – March 18, 2005
“Apple iPod sales might be plateauing, what’s new in Apple’s pipeline that will ignite growth?”
Umm… Tiger?
This punditry kills me. It’s like predicting that one day the sun will explode. Well, one day…
I don’t believe that the numbers they use reflect what is really happening out there. I can’t back this up scientifically, but over the past few years, I have noticed people in my life, not all of them close, talking about Apple when before I was the only one. several people have bought their first Apple products and there are more who vow to, but they’re saving money for the purchase.
Is 200% growth sustainable? Of course not, yet it seems that as the growth slows, that’s somehow a bad thing, or the sign of coming ill. It means nothing of the sort. Frusrating.
Growth! Growth! Growth! What impresses me most about Apple is the slow build, rather than goosing sales and juicing the stock price by cheap gimmicks. I’d much rather they keep running a profitable business that continually improves its products. Yes, I say that as an AAPL investor, who stands to lose a chunk of unrealized capital gains if Wall Street doesn’t see the absurd year-over-year exponential growth it’s come to expect. Apple is not that kind of company, and I think Steve Jobs is determined not to bet the farm on flash-in-the-pan prodicts. In 20 years, I’m pretty sure teh company will still be around. And in the long run its stock price will continue to reflect the company’s growing value and sensiible business plan.
That is the problem with being the most innovative company in the computer field – everybody expects to wowed everytime. Apple is doing just fine and if anybody is to come up with the “Next Great Thing”, chances are it will be Apple. But don’t expect something each quarter, that is unrealistic; even for Apple.
Two things…
18% growth may be just fine, the question is how much growth the other MP3 players experience. (I sure won’t mind if my investments post an 18% growth anytime soon.) If Apple continues to dominate the MP3 player/music download market 18% will be okay. Having continued iTunes domination allows for continued Quicktime penetration which opens up all kinds of future possibilities.
Second, the market isn’t anywhere nearly saturated with MP3 players. As prices continue to go down and capacity and features go up, Apple could easily have another year of triple digit growth in iPod sales.
In need of an encore, indeed. The way it’s told, Apple can never do something good enough, long enough.
Why is it no self-respecting journalist ever “expects an encore” from, say, Microsoft? I guess you have to put on a good show first.
Everybody who is confused why Wall Street is acting like such a vicious beast against Apple on a regular basis, please watch the horrifying documentary “The Corporation”. This shocking documentary shows how Wall Street & most public corporations are designed to ONLY care about one thing — increasing profits at the expense of human health, the environment, safe products, and all human welfare. Apple Computer is probably one of the very few companies that actually DOES care about quality product, human welfare, the environment, and safe products — yet Wall Street attacks them over it. People who work in Wall Street should be ashamed of themselves. And this documentary is a must-see film.
Uh, don’t these analysts get that growth is a geometric progression? As your installed base increases, sustaining the same growth rate means shipping a lot more units than previously.
As an example, in year 1 company Xyz ships 5 widgets. In year 2, it ships 15 widgets, a 200% increase over the year before. In year 3, it ships 45 widgets, another 200% increase over the year before. Next year maybe the market is saturated for widgets, and it only ships 50 widgets, which is only a 10% increase. Even so, it’s still profitable and still a 1000% increase over the first year.
So even smaller growth rates means shipping a sizeable number of units.
And of course Wall Street seems to miss the collateral benefit of iPod sales (e.g. halo effect).
Wall Street is so last century. And Steve Jobs is quite aware of that. Notice no massive layoffs at Apple each time the stock drops. Notice no cheapening of product each time the stock drops.
Apple appeases the investors, but never in spite of itself.
Continual percentage increases mean exponential growth – something that is not very sustainable for a somewhat saturated market, like iPods. Online music is a different story since people tend to buy many songs and getting another one doesn’t make the old ones obsolete, like a new iPod tends to.
If Apple has 50% growth every quarter on their iPods, then their sales would look something like this:
1: 5,000,000
2: 7,500,000 50%
3: 11,250,000 50%
4: 16,875,000 50%
5: 25,312,500 50%
6: 37,968,750 50% (not a realistic goal for the last quarter of ’06)
This is what Wallstreet wants – not going to happen.
But, if they were to increase the number of computer sold every quarter by 500,000, then this their computer sales would like this:
1: 5,000,000
2: 5,500,000 50%
3: 6,000,000 33%
4: 6,500,000 25%
5: 7,000,000 20%
6: 7,500,000 17% (A longshot, but possible goal for end of ’06)
If this happens, Wallstreet will say that Apple is doing poorly, but 7 million iPods a quarter would be very good for them, especially if they had that many per quarter for the next year and a half.
The second one does not have as much growth, but it is constant and more sustainable than the first one. Exponential growth of iPod sales would cause massive problems for Apple – they couldn’t keep up. Linear growth (based on actual sales number) is more reasonable.
So, percentage increases don’t really mean a whole lot – there are a lot of iPods out there being used and they are continuing to sell a lot of them. The same logic works for their computer too.
At a time when a lot of good companies would beg for 5-7% year over year growth, Apple has managed to go way beyond this. Even after the first quarter any GOOD analyst could and should have seen that no company could keep up that sort of sustained growth. Why do you think Microsoft stock has bascially been at $25/share for however many years. No matter how big or popular your company or product is, there are limits to growth and those limits are usually bound by market size (population) and disposable income which are both finite amounts.
Apple’s doing just fine. If they barely make estimates and the stock drops, it’s just a buying opportunity for those who see long term potential, which I think Apple has plenty of.
I second the recommendation to see “The Corporation”
It is available at NetFlix BTW as well as many other excellent documentaries.
Yes, I also recommend The Corporation. It’s about time people started to wake up to the harsh reality here and do something about it.
I don’t get it, unless things are drastically different in the marketplace in the US. We have no iPods on the shelf and desparately WANT them, NONE of the major retailers in a city of close to one million has an iPod, only a few shuffles. Our warehouse for a chain of 60 stores doesn’t have any iPods. Yet two thirds of all walk-in trafffic and two-thirds of all phone inquiries are requests for iPod and iPod minis, if you have a “glut” in the US please PLEASE send them to us! We’d love to sell them, I’m tired of looking at empty shelves!
As I said before don’t espect rationality from Wall Street, neither fear or greed is rational.
Thumbs up for “The Corporation” the psychopathology of the market is well documented!
“Signs of a plateau are clear.”
6.155 million iPods this quarter! Eat crow, Sarah!
The pundits as usual are completely wrong. There is no indication that iPod sales have plateaued at all. Apple is still hitting on all cylinders. The third quarter is supposed to be a bad quarter for computer sales. Apple defies all expectations.
My prediction, shares will fall tomorrow. They always do for Apple after an earnings announcement.
Where do these idiots get the crystal balls they all gaze into? I’d like one.
g$–
Why would you want a broken crystal ball?
Of course Wall Street is amazed Apple didn’t go out of business years ago. ” Apple is making money how could that be, their suppost to go out of business, it must be a fluke.”
A lot of newspaper writers are morons but the one “covering” finance are the worst (althought those “covering” politics are pretty bad too). We shouldn’t get all bent out of shape they say something stupid, its a waste of time. When they are wrong it doesn’t matter their just writers.