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Summary:

We all know that criticizing IPod can be injurious to your server’s health, but this link from Mike hoefflinger is a bit of a reality check about Apple’s problems which are not obvious to the eye or to the analysts. While rest of the world including […]

We all know that criticizing IPod can be injurious to your server’s health, but this link from Mike hoefflinger is a bit of a reality check about Apple’s problems which are not obvious to the eye or to the analysts. While rest of the world including the most powerful newspaper on the planet was celebrating Apple’s great quarter, Mike came up some damning data:

Most important, however, is the bad news in the iPod units numbers, which the graph below points out. Although unit shipment comparisons to calendar Q2’03 look rosy, the comparison to calendar Q1’04 (much more relevant for a supposedly fast-growing product like iPod) looks ominous: iPod sales are dramatically flattening over the last two quarters. Particularly notable is the the anemic 7% growth from Q1’04 to Q2’04, especially when compared to a 280% growth rate in the same period in ’03.

I suspect this is because the company has not introduced a new IPod Product in months and needs to quickly refurbish its product portfolio to keep the growth engine purring. Engadget has a link to the Newsweek cover with the 4G IPod. I guess Apple needs this now.

  1. Packetologist Sunday, July 18, 2004

    In the past numerous times we have seen Apple be first to market with super cool products. However, Apple generally fails to appeal to the mass market. I imagine sales growth will decline with the intro of the Microsoft and Sony based devices.
    A lot of truth to the statement that “Apple does the R&D and test marketing for the PC and peripheral industry.”
    Having said that I wish the best to Jobs & Co. As I would like to own a Mac based system in the next 12-18 months.
    As a side – their WiFI system is hella cool

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  2. Peter Johnson Monday, July 19, 2004

    iPod sales stalling? Dream on!

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  3. hey look at the numbers on the other site and you could see it the proof. Not sure what it means in the long run but last quarter data did not look too good

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  4. OM,

    Sorry, dude, those numbers are useless for precisely the reason outlined by Doggert — demand is NOT flattening, Apple literally CAN’T keep up with demand because the parts aren’t being made fast enough. Pay enough attention to the industry and you’d find that the manufacturer of the mini-drives recently announced plans to TRIPLE capacity, an expansion directly related to the popularity of the Apple iPod.

    Analysts have been trying to find dark linings for every silver cloud for over 20 odd years… I wouldn’t hold much stock in any of them.

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  5. Totally valid point on sales vs. demand and the issue of supply shortages.

    A few additional thoughts:

    (1) While under-supply certainly is better than under-demand, this has been going on for a while now, and points out that Apple is struggling to manage its suppliers. I’m all for artificial scarcity, and I do agree that MSFT and Sony players may not be a near term threat, but after a certain amount of time you have to supply your demand, or someone else will.

    (2) Although you could argue that the $249 price for the mini is artificially high to protect against further demand, you have to wonder when Apple will open the lower prices. Simply putting larger disk space iPods at the top of the ASP range and expiring products as they slide below $299 is not a way to do CE business (take a lesson from the AP vendors, who know how to sell 20MU and know when to drop prices). Maybe he’ll price drop for X-mas, or when he has the supply situation under control, but price drop he will have to.

    (3) Lastly, the weakness in the core business (127KU incremental Macs w/ no contribution to bottom line) leaves iPod business very exposed…

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  6. The excerpt above brings up a good point but fails to distinguish between sales and demand, which is important in this case. If demand for iPods were decreasing there might be cause for concern. This is not the case, demand is very strong.

    This issue is that the manufacturer of the hard drives for the iPod cannot keep up. Sales are flat because manufacturing has been flat. Pre-sales for the iPod mini have been staggering in both US and Europe.

    Listen to and review the quarterly reports http://www.apple.com/pr/library/2004/jul/14results.html and you will notice that there is enough demand for iPods that they will be struggling to fill the orders they have now.

    There are still key markets they could open up as well as different product lines the could easily introduce but there is no sense if you can’t keep up with what you have now.

    The price on the minis is very likely artificially high simply to curb demand. They could easily drop this to $219 – $229 range and still make a profit but they could never ever hope to keep up with the orders.

    I see no doom in the iPod market as many people would hope AND I don’t see the other products such as SONY’s or Microsoft’s stealing away significant market share. There have been iPod/iTunes killers introduced weekly (just do a google search on articles about an “iPod Killer”) and none have them have had the traction that the iPod has.

    As a disclaimer I have had a couple “real” MP3 players including a Nike Rio PSA (which was cool for the time), and a 3rd generation 10 gig iPod. I don’t count MP3 functionality of my PDA.

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  7. Doggert, you make great points. I think demand is there, and will be there because Apple is doing a bang-up job of marketing the hell out of IPOD. And as the Newsweek story suggests, it has become a cultural icon like the original MAC and the WALKMAN. I feel that the challenge for Apple is to keep the quality high, enough product in the market that there is no-over supply, and at the same time there is no room for competitors to even imitate their way into the business. I have owned every IPOD that was ever sold, and let me tell ya, nothing even comes close.

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