Apple
Joe Wilcox at Microsoft Monitor talks about how he thinks Apple may have shot itself in the foot by introducing the low-priced iPod Shuffle. He notes that while Apple boasted about total iPod shipments up 16 percent sequentially but revenues were down 16 percent. Moreover, they didn't break out numbers for specific iPod models, leading Joe to infer that the cheap-ass Shuffles are cannibalizing the upper-end 'Pods.
I wrote here before about I thought the introduction of the Shuffle and Mac mini were potentially brilliant marketing ploys aimed at broadening Apple's appeal beyond the hard-core faithful by luring people in at lower price points and then eventually switching them up to higher priced products.
For instance, someone who had always wanted an iPod but was turned off by the high price might hear about the Shuffle and come in to check it out. While they are in the store, they see the Mac mini, with its starting price of $500, and think, "Wow, I didn't know Macs were so cheap, and it is time to upgrade my PC. Maybe this is the time to switch." Indeed, Apple's earnings release said that CPU shipments were up nearly 50 percent from a year earlier. I wonder how many of those were Mac minis? If the new entry-level products are driving sales of higher-end machines, it might take a couple quarters for the effect to become apparent.
The other factor is the iTunes music store. Each of those iPods ships with the iTunes software (in fact, can only work with the iTunes software). Once iTunes is on somebody's machine, Apple's just a few clicks away from a steady stream of music download revenue. Apple shipped more than 5 million iPods in its latest quarter. If they can convince even half of those to buy a few songs a month for 99 cents each, that's $12.5 million in extra revenue a month, or $150 million a year. Just off of one quarter's subscribers. But again, it might take a couple quarters for that revenue stream to become apparent.
Anyway, this is just my idle speculation and Joe is possibly right. In fact, since he is a professional consultant and I am just as schmoe with with blog, Joe is more than "possibly" right, he is most likely right.
The old adage "no news is good news" really should be "no news isn't bad news" when applied to public company financials. I can't imagine that Apple would miss an opportunity to tout iPod Shuffle's success unless the product didn't sell as well as expected or sold better and pulled sales from higher-priced models. I'm thinking the latter. And, of course, lower pricing on hard disk models shouldn't be ignored as a likely, major factor contributing to the sequential revenue decline.I'm not so sure. That is, I'm not sure there's not a bigger play here.
I wrote here before about I thought the introduction of the Shuffle and Mac mini were potentially brilliant marketing ploys aimed at broadening Apple's appeal beyond the hard-core faithful by luring people in at lower price points and then eventually switching them up to higher priced products.
For instance, someone who had always wanted an iPod but was turned off by the high price might hear about the Shuffle and come in to check it out. While they are in the store, they see the Mac mini, with its starting price of $500, and think, "Wow, I didn't know Macs were so cheap, and it is time to upgrade my PC. Maybe this is the time to switch." Indeed, Apple's earnings release said that CPU shipments were up nearly 50 percent from a year earlier. I wonder how many of those were Mac minis? If the new entry-level products are driving sales of higher-end machines, it might take a couple quarters for the effect to become apparent.
The other factor is the iTunes music store. Each of those iPods ships with the iTunes software (in fact, can only work with the iTunes software). Once iTunes is on somebody's machine, Apple's just a few clicks away from a steady stream of music download revenue. Apple shipped more than 5 million iPods in its latest quarter. If they can convince even half of those to buy a few songs a month for 99 cents each, that's $12.5 million in extra revenue a month, or $150 million a year. Just off of one quarter's subscribers. But again, it might take a couple quarters for that revenue stream to become apparent.
Anyway, this is just my idle speculation and Joe is possibly right. In fact, since he is a professional consultant and I am just as schmoe with with blog, Joe is more than "possibly" right, he is most likely right.
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