Apple Computer Inc. confirmed on Thursday a
stating that a new iPod division had been set up at the company, splitting the Macintosh and iPod hardware segments. While Apple said this would allow the company to focus resources on the iPod, analysts believe that it solidifies the importance of the iPod within Apple and could be the start of something bigger for the company, such as the release of other digital devices.
“By creating an iPod division, Apple is establishing the device’s relevance is much more than just playing music,” Jupiter Research Senior Analyst Joe Wilcox, told MacCentral. “Apple is recognizing iPod as an integral part of the company’s product line and an important contributor to the revenue mix.”
Longtime Apple Vice President Jon Rubinstein, will head up the new iPod division, while Tim Cook, Apple’s executive vice president of Worldwide Sales and Operations, will lead the new Macintosh division.
“This organizational refinement will focus our talent and resources even more precisely on our industry-leading Macintosh computers and the wildly successful iPod,” Apple said in a prepared statement.
In its most recent financial quarter, Apple sold 807,000 iPods, a 909 percent increase over the same quarter a year ago and 10 percent more than it sold during its last record-setting quarter. That provided a total of about $264 million in revenue for Apple. In comparison, Apple sold 217,000 iMacs and eMacs combined for the same quarter, accounting for $252 million in revenue.
“It [setting up the iPod division] does not surprise me,” said Technology Business Research Analyst Tim Deal. “The iPod has taken an integral role in Apple’s product strategy, much like the colorful iMac did when it brought the company back from the brink of disaster in 1998. But now, the iPod is accounting for nearly 14 percent of the company’s total revenue, while the iMac has dropped to 13 percent. It makes sense to focus on a product that’s easier to manufacturer, ship, and market than a computer — especially if it’s yielding higher revenue and gross margins that I estimate to be near 23 percent.”
While the iPod is accounting for an increasing amount of Apple’s revenue, and the success of the iPod/iTunes Music Store combination has received most of the buying public’s attention, analysts don’t believe Macintosh development will suffer. They see the divisional split as a sign that Apple is taking advantage of non-computer revenue opportunities.
“I don’t think that Mac hardware development will necessarily take a back seat to the iPod — Apple’s total Mac shipments were up year-over-year this last quarter,” said Deal. “However, I do think that Jobs is well aware of the fact that Apple’s growth is dependent upon exploiting beyond-the-box sources of revenue. Software, services, and iPod sales combined accounted for 39 percent of the company’s total revenue last quarter. Non-computer revenue was up nearly 100 percent from the year-ago-quarter.”
The new iPod division already has two products under its umbrella with the release earlier this year of the iPod mini. With a separate division, that may not be the end of the innovative devices coming out of Apple.
“Apple has released a second device in iPod mini, so it’s reasonable to assume that the company will continue to innovate particularly with the creation of this new division,” said Jupiter’s Wilcox.
Overall, the split of the iPod and Macintosh hardware divisions is being viewed as a positive for Apple, a move that will allow the company to focus resources on the growing market share of the iPod, while continuing to improve on the Macintosh.
“The new division clearly shows that Apple sees broad potential beyond offering music devices or services,” said Wilcox. “I’ve said for some time that non-PC devices like iPod could emerge into platforms in their own right. Apple would be smart to begin building an iPod ecosystem around which third parties can develop peripheral and entertainment extensions.”
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