Analyst: Smart Apple investors look beyond iPod numbers and discount Apple rumors

“Simmering beneath the surface of Apple’s recent banner fiscal third-quarter financial results — the highest revenue and profit in Apple’s history — is an iPod warning sign,” Herb Greenberg writes for The Wall Street Journal.

“Sure, a 21% increase in unit sales shows that the iPod continues to fuel the company’s earnings — just not the way it used to. The ubiquitous iPod may be becoming a victim of its own success, as it nears the saturation point that eventually catches up with most hot products,” Greenberg writes.

“While last quarter’s 21% increase was respectable, it is sharply lower than the 32% increase of a year earlier. Then, there is the iPod’s revenue growth, which skidded to just 5% from 36% a year ago. That suggests not only aggressive price promotions by Apple (always a sign of sagging growth) but also a migration of consumers to the least expensive iPods,” Greenberg reports.

“The iPod ‘is rapidly becoming a mature product,’ says veteran analyst and longtime Apple fan Charles Wolf, president of Wolf Insights… even a mature iPod ‘is incredibly important,’ because it is converting non-Macintosh computer users into Mac buyers and is driving revenue from other sources, such as iTunes. And that, he says, ‘is where the juice in the story is. Not the iPod.’ And not even the iPhone,” Greenberg reports. “That is something he says smart Apple investors understand. For Apple’s stock to fall on a rumor, Mr. Wolf says, suggests some Apple holders aren’t thinking rationally.”

Full article here.

25 Comments

  1. Jane you ignorant slut!

    Consumers are awaiting a new design before upgrading their iPods, namely an iPhone without the phone.

    Apple can keep selling iPods until every person in the world has at least two of the latest models. The ocean is deep and full of fish!

    If its innovative and desirable, Apple can sell them from now on.

  2. Sony sold 300+ million WalkMans in its day. Apple has quite a bit of room to grow yet. What also makes Apple unique and in a position to buck previous sales trends is how they shake up their product line. They aren’t afraid of ruining a good thing, because if they can make it better than before, people will buy all over again.

    Nothing grows like a new hit product forever, but if any company’s able to maximize its sales potential by pushing their products’ lustfulness, it’s Apple.

  3. People are waiting for the next iPod. Those that aren’t waiting are buying an iPhone instead. I average an new iPod every year and a half. My wife averages one every two years. My year and a half has come, but Apple is still selling the same iPod I currently own. This December will surely net me a new iPod.

  4. Aggressive price promotions, Herb? Other than the student back to school buy-a-Mac, free-iPod promotion which they’ve run the previous 2 years, I haven’t seen any iPod price promotions. That’s not how Apple works, Herb.

    So yes, Herb, more and more people are buying shuffles, leading to lower revenue growth, but both the iPod and iPod nano still outsell them (see Apple Store and Amazon as examples). But these shuffles are either going to people who couldn’t afford an iPod (thus, expanding the market and creating/maintaining a desire for a better model within the iPod family), or they are 2nd or 3rd iPods for those who already have an iPod (thus, keeping them within the iPod family).

    But both sets of consumers are just awaiting the next big iPod upgrade, and that will be here in September. Can’t you see the Apple method, Herb?

    That said, year-over-year iPod-only comparisons do get tougher. But the owner of an iPod is more likely to buy from iTunes, an AppleTV, a Mac, Apple software, or an iPhone. There are plenty of growth engines left within Apple.

  5. Mark:
    But the owner of an iPod is more likely to buy from iTunes, an AppleTV, a Mac, Apple software, or an iPhone.

    Not to mention, products that have yet to be announced. ” width=”19″ height=”19″ alt=”wink” style=”border:0;” />

  6. Even with people waiting for new iPods or buying iPhones, the growth of 21% is 86.6% of the previous 31%, which means that in raw numbers it’s nearly the same increase in sales.

    It’s odd how ‘analysts’ never seem to understand the basic numbers, which includes the fact that sales are still increasing significantly, let alone at nearly the same rate as earlier. Any time you can increase sales of a product that has already been sold over a hundred million times, you’re doing a lot of things right.

  7. I still have my first iPod, a 3g. My son has a 5g v1, bought my wife a pink engraved nano when she finished nursing school, and just bought my young daughter a green shuffle. My kids are hooked as am I. So the bandwagon continues to grow. The thing is, we havent’ upgraded our Macs in years. If I can get a new iMac with Leopard, then I’ll max out the credit card for that too. I’m sure I’m not the only one waiting for fresh OS X.

    Just increased my AAPL shares too. This company has tons of growth potential.

  8. “some investors aren’t rational”

    yet all the comments here have been insightful and rational….

    ….much more so than the analyst.

    if i were him, i would feel pretty silly about now.

    MW: green is the “color” of envy, money (in the US) and a choice in iPods. sure beats brown.

  9. I’m worried about Tuesday. I think the “lower revenue because of a product transition” is going to be real.

    Not that I’m really worried. Thankfully I bought in a while ago at a point that seems deflation-proof. Still, it hurts to see the paper value dropping. And I do think Tuesday will be more of the same.

  10. I have had a chunk of money burning in my pocket waiting for the right products that Apple have NOT yet released:

    • iPhone 2.0 (don’t want v1.0 bugs, want new features)
    • iMac or 12″ iTablet (want new form factor and possible touch features)
    • Leopard (enough said)
    • AppleTV (will buy once video rentals are available)
    • iPod (g5 is OK, waiting for g6 or iPhone)
    • iWork (need Pages for wp, not just DTP. I miss MacDraw, AppleWorks equivalent)

    I have wanted to spend money these past 2-3 MacWorld’s but the products are not quite there for me. I hope 2007-2008 is a big spender for me, since I have been waiting for too long.

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