Editorial: What should be Apple's next iPod move?
By Peter Cohen, firstname.lastname@example.org
Apple's big news this past week was its fourth quarter FY04 earnings report. The company announced a profit of US$106 million on revenue of $2.35 billion -- up 37 percent for the same quarter a year ago and its highest fourth quarter revenue in nine years. Apple's quarterly figures were strongly affected by two factors that were unimaginable only a few years ago -- revenue from its own line of retail stores and revenue from a music player, the iPod.
Apple moved 2.016 million iPods during the quarter, and the vast majority of those were Apple-branded iPods and iPod minis. Only 6 percent of Apple's overall iPod deliveries were of Apple iPods from HP. Apple's HP iPods were still of sizable quantity, but it demonstrates just how much demand there is for iPods from Apple.
That's an astonishing 500 percent increase in unit shipments year-over-year, and by at least one market research report's estimate, helps account for Apple's 92.1 percent share of the market for hard drive-based MP3 players. What's more, the iPod brought in $537 million dollars in revenue for the quarter. That's more than any other single product segment in Apple's line, and demonstrates just how important the music market is for Apple going forward.
With such huge success with the iPod, Apple's seeing something it hasn't in years -- the unabashed admiration of Wall Street investors. While Apple's stock has been on the rise steadily for months now, it leapfrogged after the earnings report was published, going from $39.75 on Wednesday afternoon, prior to the report, for $44.98 the following day on volume of more than 50 million shares -- more than twice the preceding day's volume. Apple stock closed at $45.50 on Friday.
How does Apple keep that momentum, and those sales, continuing to rise? The market for the iPod is far from peaking, if other market research reports that have come to light in recent weeks are any indication. All sources suggest that the demand for hard disk-based digital music players is going to continue to grow for years. But that's predicated on the assumption that economy of scale and maturity of the technology used in these markets will drive prices down and companies will continue to expand choices.
Apple's the digital music company to beat for the moment -- they have a music download service and a player that consumers both want. But it's unrealistic to expect that Apple's dominance will continue indefinitely: The consumer electronics market is not dominated by any one particular device or manufacturer, although there are many brands that consumers are loyal to and aware of.
Apple can continue to capitalize on its iPod success by continue to diversify the iPod line to make it even more appealing to a wider swath of potential consumers. The iPod mini was an important step in that direction, but it's not the only one. Rumor sites are abuzz with the possibility that Apple is on the cusp of releasing an even larger-capacity iPod, possibly with a color screen and additional features. Other segments worth exploring include the inexpensive wearable flash player market, particularly appealing to trend-conscious teens and and college-age young adults on limited budgets.
By the way, the smaller stores I suggested in last week's MacCentral newsletter editorial are a reality after all -- Apple CEO Steve Jobs, in his first public appearance since cancer surgery over the summer, took the wraps off the first such store at the Stanford Shopping Center earlier this week. Apple opens six such locations this weekend in California, Washington and New Jersey. Three more are due to open by the end of the year in New York, Missouri and Maryland.
Apple Computer Inc. on Wednesday reported a $106 million profit or $.26 per diluted share for the company's fiscal fourth quarter. Revenue for the quarter was $2.35 billion, up 37 percent from the year-ago quarter led by the shipment of over 2 million iPods.
At a private viewing at Stanford Shopping Center in Palo Alto, Calif., Apple Computer Inc. on Thursday unveiled a new 750-square-foot "mini" design for its retail store. The first six stores using the design, which Apple CEO Steve Jobs -- in his first public appearance since cancer surgery -- described as "designed to be small, and cool because they are small," will open this Saturday.
Graphics card and chip maker ATI Technologies Inc. is one of dozens of vendors exhibiting at the Digital Life expo happening in New York City this week, and the company has quietly unveiled a new Mac-compatible graphics card that can drive Apple's 30-inch Cinema Display. Although ATI has not formally announced the card, it is being shown on a Power Mac G5 equipped with both a 30-inch display and an older 23-inch Cinema Display. This is the first card ATI has produced that can drive the massive 30-inch display, which up to now has depended on Nvidia's GeForce 6800 Ultra card -- available only as a build-to-order option with Power Mac G5s.
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Microsoft Corp.'s Mac Business Unit (MacBU) on Tuesday announced the availability of Office 2004 for Mac Service Pack 1, an update for the latest Macintosh release of the company's popular productivity application software suite. The service pack "addresses potential security issues and bugs that [user] feedback played an important role in identifying," according to Microsoft. What's more, the new version features support for Microsoft Error Reporting Protocol (MERP), which allows customers to send bug reports to Microsoft anonymously.
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Around the Web
Hopinkton, Mass.-based EMC Corp. announced Tuesday that it has acquired Retrospect backup software maker Dantz Development Corp. The deal closed on Friday, October 8, 2004 and was done as a cash transaction valued at less than US$50 million. Dantz is EMC's 15th software acquisition since 2000, according to the company.
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This story, "MacCentral Week in Review" was originally published by PCWorld.