Apple iPods: Are we saturated yet?

Apple iPods: Are we saturated yet?

Summary: Following Apple's strong fiscal first quarter and conservative outlook the Monday morning quarterbacking is interesting. Some analysts think Apple was just being prudent with its disappointing (to analysts) second quarter outlook.

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TOPICS: Apple, Hardware, Mobility
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Following Apple's strong fiscal first quarter and conservative outlook the Monday morning quarterbacking is interesting. Some analysts think Apple was just being prudent with its disappointing (to analysts) second quarter outlook. Others see Apple as some sort of economic indicator, a take which is a complete joke. But one takeaway stood out: The maturation of the iPod market.

As a brief recap: Apple reported a great first quarter, but the outlook spooked investors. Now Apple's results (Techmeme) are being portrayed as evidence of a slowing economy, which is laughable. David Morgenstern asks whether Mac, iPhone and iPod sales are really an economic barometer? Short answer: Nope.

With that out of the way let's get to those iPod worries. Apple's iPod unit growth was 5 percent--in the holiday season. Now that's still 22.1 million iPods (the laws of large numbers are in play here). But Apple execs talked about the iPod being more than a music player signaling they want to reshape the worries a bit. Whatever category the iPod is in the fact is we all have three of them. Planned obsolescence only goes so far.

UBS analyst Ben Reitzes said the key for Apple is "the pace of the hand-off to the iPhone and Macs." In English that means Apple need the iPhone and new Macs to drive growth since iPod sales are slowing.

Reitzes wrote:

Even though iPod demand is clearly worrisome, Macs continue to surprise to the upside, driving higher sales of software and peripherals as well.

Reitzes then raised his earnings estimates a smidge due to Mac sales. He projects flat iPod unit growth in the second quarter.

And flat is not good. In the first quarter analysts were looking for iPod unit growth of 16 percent or so. They got 5 percent.

Bank of America Scott Craig said:

iPod units were below our expectations, up 5% year over year (Y/Y) versus our 16% Y/Y estimate, with the U.S. flat Y/Y. However, ASPs were significantly better than expected (up 11% Y/Y versus our estimate of a 3.4% decline), due to strong adoption of higher-ASP iPod Touch. The modest iPod unit growth, despite the benefit from the new product introductions and product refreshes in September, and seems to indicate that this is a maturing market.

Other commentary was very similar, but some analysts said product transitions and international growth can refuel iPod sales. The big questions: Are iPod sales representative of anything scary? Are iPods a signal the consumer is spending less? Is there a GDP hit here? Can a pink iPod nano save the economy?

I'm joking about those questions because they are silly. But they will be asked--a lot. The only thing iPod's unit growth reflects is that most folks have 3 of them already. And like Apple's outlook, that 3 iPod per user guesstimate is conservative.

Topics: Apple, Hardware, Mobility

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123 comments
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  • Apple is to economy what...

    Mosquito is to an elephant. Apple is nothing, a mere piece of roadkill on the information superhighway. That highway is driven, maintained and designed by Microsoft. Vista powers the economy. We all know that. Disposable income, spent wisely on XBOX 360's and Zune players. No, Apple is only a harbinger of what will happen to all companies that refuse to get out of the way of the Vista steamroller.
    Mike Cox
    • Way to toe the line!

      There ya go. You just keep hanging in there with those 20 year old notions, proven wrong year after year. What the hell, you just might get lucky some day. Then you can say "It took 40 years, but.... I TOLD YA SO!"
      BitTwiddler
      • Oh, hell. It was Cox. Never mind...

        What WAS I thinking :)
        BitTwiddler
        • What, are you a newbie now? :) nt

          nt
          JLHenry
          • He just did not note the authors name before responding ..thats funny! - NT

            NT
            raycote
        • Too late

          Still counts as a hook.
          Michael Kelly
        • AH.. the Emily Latella Moment... Classic..!

          n/t
          Wolfie2K3
    • Vista???????

      Ah yes.... Vista makes me cry for joy.. makes me yearn for the good 'ol Windows ME days. Yay... ME comes back.
      ed777
      • Here, fishy, fishy, fishy . . . ;)

        You got one (and a half <snicker>), Mike!! 8.8 for the nostalgic "MS Uber alles"
        JLHenry
    • I this were Slashdot......

      and i had some mod points, I'd mod you as funny, +1 !!
      arminw
    • Cox is hard

      Cox is always really hard on those who oppose Microsoft.

      If you get Microsoft, you get Cox!
      Len Rooney
    • I Agree With This Comment

      Because only the blind would not see that Vista is taking the world by storm!

      In fact, every gaming and home computing reporter I know is indicating that Vista
      is far superior to Windows XP in every way - device compatibility, frame rate,
      system load when idle.

      Vista is, in fact, the Chosen OS, which has been blessed by the Almighty. Anyone
      who fails to acknowledge this Truth will be struck down by plague and pestilence!
      grail@...
  • Saturated with iPods?

    Hmmmmmm. Well if one is going to have a problem then this is the one I'd choose
    too have.

    Pagan jim
    James Quinn
    • Not me.

      I'd rather have the problem of which supermodel to be with tonight!! ;)
      JLHenry
      • Is that you Tom Brady!?!

        Is (4) SuperBowl rings not enough for you?

        Pagan jim
        James Quinn
        • Tom Brady

          Only has 3 rings, you must be thinking Adam Vinateri (spelling). Tom does have a dilemma though, how much HGH to take before the game.
          Rick_K
          • No mistake it's a given he's gonna have 4 soon enough!

            Pagn jim
            James Quinn
      • Tony Romo?

        Stop doing this because you are screwing up your game.
        Also those drugs you are taking screwing what little brains you have.
        phatkat
  • A better indicator of the economy I think....

    Was last weeks Barrett-Jackson Auction in Scottsdale.

    Compared to previous years, it was a completely lackluster.

    When B-J's biggest sale is a Concept Corvette at only 1.6M, it almost indicates the earth has tilted on it's axis.
    BitTwiddler
  • I don't have one either

    No plans to get one as well. Just too far down the list of priority items and besides there are cheaper alternatives one can get as well.
    voska1