“Apple passed an important milestone last quarter that nobody on Wall Street seems to have noticed: the iPod, once Apple’s No. 1 source of revenue, fell into third place after the Mac (No. 1) and the iPhone (No. 2),” Philip Elmer-DeWitt blogs for Fortune.
“Think of Apple’s business model — as Steve Jobs often does — as a three-legged stool: Mac, iPod, iPhone. As recently as 2006, the iPod leg accounted for 55.5% of Apple’s revenue. By last quarter, its share had shrunk to less than 18% [but, still an increase over the 14.21% iPod contributed to Apple’s total revenue in the same quarter in 2008],” Elmer-DeWitt reports.
“But this is a good thing, argues Bullish Cross‘ Andy Zaky, a day trader and occasional blogger whose estimates of Apple’s earnings regularly beat — by a long shot — the estimates published by professional analysts,” Elmer-DeWitt reports. “‘Many Apple critics have argued that Apple would essentially fall off the earth because at some point in time the iPod’s growth would collapse,’ says Zaky. ‘The second part is true. The iPod growth rate has in fact fallen off a cliff as Apple posted its first yearly drop in iPod sales ever in Q3… However,’ he adds, ‘Apple is still firing on all cylinders thanks to the explosive growth of the iPhone.'”
Elmer-DeWitt reports, “The iPhone passed the iPod for the first time in 2009 Q3. The Mac [at 40%], however, is still the largest and most important leg of Apple’s three-legged stool.”
Full article, with excellent charts, here.
And the iPhone has only just begun.
Well, the iPhone is essentially an iPod with a phone and internet access, so it doesn’t make sense to consider these as two completely different products. If Apple has a third product, it would be Apple TV, which doesn’t come close to Mac or iPhone/iPod sales. If they stuck a DVD/Blueray player in it and the ability to record television shows, they wouldn’t be able to make enough of them to keep up with demand.
The guy is smart. And so is Apple. They knew that the iPod business would flatten out and the ASP of the devices would have to drop to remain competitive. So they came up with a new device that had iPod functionality as well as other uses which allowed them to charge a higher premium.
Another thing to consider is that the amount of revenue Apple are generating in total is much higher because of the introduction of the iPhone. This will inevitably cut the % revenue for the iPod or any product line.
Zaky also chooses to compare Q1 2006 (holiday Q) with Q3 2009. In Q1 2009 the iPod was 33% of revenue becuase just like the previous years iPod sales peak at Xmas. So he is not comparing like with like but using the extremes to make his case.
One also should take into account that if you combine the iPhone and iPod sales together that overall sales of iPod-like units is still growing. This is why Apple is smart because they have provided a way to grow the iPod business even when the standard customer base was saturated.
Innovation is the key. Come up with new products for people to buy.
There is no doubt that the iPod line will eventually be discontinued, or relegated to the AppleTV levels. Fewer and fewer people will have the reason or need to buy an iPod when an iPhone is providing the functionality. Much like Palm used to generate huge profits with their Palm Pilot and successors, during the early 2000s, before smartphones begun appearing. Everyone was getting a Palm device for Christmas back then. Last December, they announced no more PDAs, and will continue to support existing Zire and Tungsten models. Palm’s competitors of that time (Dell’s Axim, HP’s iPAQ, etc) would now have a clear field to establish domination in the PDA market. This will be the same with the iPod; once Apple withdraws, Zune can establish itself as the winner of the MP3 player wars. Too bad nobody will be buying them anymore, just like nobody buys PDAs today…
The more expensive iPod touch will replace many of the older model iPods.
#4 Da Verld!
The iPod Classic has the memory I wanted with the video etc. The iTouch does not have the memory that I wanted. It is superior, however, almost everywhere else though. It is a quest of balancing the two, the high memory wanted and the functionality required.
The likelihood that Apple will ever discontinue the iPod is very small, reason being that people will always want portable music and not necessarily connected to the phone. Additionally the iPod is a farm of future iPhone buyers.
FWIW, my estimates of revenue for fiscal Q4 show iPhone revenue surpassing Mac revenue for the first time (there will be no looking back).
I thought the three legs of the stool were Mac, other devices, and services.
But then, what about software? I think this stool has more legs than they’re letting on.
it’s like THIS:
the ipod will always be (the iphone is not an ipod replacement neither is the touch) there will ALWAYS be a market for a ipod nano like device. The classic may be replaced by the touch when and ONLY when the touch has 80-120Gb of storage.
that’s all.
@ Predrag, on the contrary, it’s the iPhone line that is doomed to a slow death. In fact it was probably only ever a temporary product line.
I’m convinced the iPhone was only ever a placeholder until ubiquitous wireless internet access blankets the country. I think the iPod is destined to get an Apple-designed VOIP service, and the iPhone (all dedicated “phones” for that matter) will disappear.
I mean that’s why it was called an “iPod”, and not an “iMusicJukebox” or whatever. It is after-all a general purpose mobile computing platform.
Great news. The phone and tunes player will always be fun gadgets. The computer is the serious future of Apple Inc. Thank goodness.
Ballmer’s idiotic decisions are Apple’s fourth leg.
And some dumb-ass analysts were predicting a few years ago that Apple would abandon the Mac completely to become a consumer electronics company, so it could focus on selling iPod’s and iPod accessories.
TT … re: your numero quatro
Yea, you might be a crotchety senile ol’ fart, at times …
” width=”19″ height=”19″ alt=”wink” style=”border:0;” />
But lotta times, like this one
You sure demonstrate a firm grasp of the reality awaiting up the road
BC
Oops, Cube, sorry
You “see” it too …
” width=”19″ height=”19″ alt=”wink” style=”border:0;” />
Yea, like ya’ll, never been much of one myself for those 3 leggers
Get kicked over too easy at milking
And as we all know – gotta take good care of those Cash Cows
(Moo-you better warm up your hands before you grab those, Moo)
TheConfuzed1
Awww, mo’pologies, also missed you in your quest for “more legs”
But since you’re confuzed you may not have noticed …
” width=”19″ height=”19″ alt=”cool smile” style=”border:0;” />
There is a huge difference in “emerging markets” and “saturated markets”. Continued sales and support of “saturated markets” is the most stable of economies, if a company recognizes this.
Quality product emphasis supports saturated markets (Apple, Toyota, and recently Ford); Profit focus supports emerging markets (Windows, GM).
@BC Kelly–
Don’t tell my secret, but I’ve never really been very confused. It’s a front.
” width=”19″ height=”19″ alt=”wink” style=”border:0;” />
it’s like calling a big guy “Tiny,” or a fat guy “Slim.”
But remember to keep that to yourself, mmmkay? 😀
@RGKahn
@Gregg Thurman…
So true!!
@Macboer…
You are sooo.. right! I actually bought the iTouch because the iPhone DID NOT have enough storage! I am sure I am not the only one that had that consideration. I still have my ‘Classic’, but I use it just for storage.
The only reason to buy the ‘Classic’, is for the storage space! As soon as that is corrected, at a somewhat reasonable price, it will be gone!