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Apple iPod sales to pass 37m this quarter - analyst

Can it be done?

Analysis Apple will have sold more than 37m iPods by the end of the year, putting it in a position where it really can start enjoying the much-vaunted halo effect that will boost its share of the computer market.

So claims senior Piper Jaffray analyst Gene Munster, according to a Forbes report.

"We expect the iPod to continue to be a foundation for growth in other parts of Apple's business, and we expect that by the end of calendar 2005 more than 37m iPods will have shipped, providing Apple with a greater scope of awareness for various products," Munster told investors this week.

Forbes appears to read Munster's forecast as 37m shipments in 2005, but since Apple has shipped only 17.917m digital music players in the first three quarters of the year, it will have to sell 19.083m more in that last three months of the year to meet Munsters' target.

With only 6.451m shipped in Apple's fourth fiscal quarter - effectively equivalent to the year's third calendar quarter - that means it will need to grow shipments by almost 196 per cent quarter on quarter.

More likely, we'd say, Munster's figure represents overall iPod shipments to date. Apple hasn't published such a figure thus far - it only began breaking out iPod unit sales when it published its Q4 FY2003 figures in October 2003, around two years after the iPod was launched. Apple's published numbers for Q4 FY2003 and all subsequent quarters put the total to date at 27.249m, but that's likely to be short by the three hundred-thousand units we estimate shipped between the device's Q1 FY2002 launch and Q3 FY2003.

Even so, that still leaves Apple needing to ship the best part of 10m iPods in the current quarter, if Munster's target is to be achieved, which amounts to sequential unit-shipment growth of 46.5 per cent or thereabouts.

Realistic forecast?

Can Apple manage that? Well it has done so in the past, between the third and fourth quarters of FY2004, when it experienced its first big surge in iPod sales. Then shipments leapt from 860,000 in Q3 FY2004 to 2,016,000 in Q4 FY2004, an increase of 134.4 per cent. In Q1 FY2005 it shipped 4,580,000 iPods, an increase of 127.2 per cent. Since then, sequential growth rates have fallen to around 16 per cent and, most recently, 4.8 per cent.

However, the introduction of both a highly slim form-factor with the Nano, the ability to play videos on the hard drive iPod and, we'd note, the addition of black-hued versions, takes Apple into calendar Q4 with a strong product portfolio - scratched screens notwithstanding. Apple already has a strong lead over its competitors, and the new models should only reinforce that.

More to the point, its rumoured deal to ensure adequate supplies of Flash memory chips will make it harder for rivals to produce sufficient numbers of players to compete, so some complain. With fewer alternatives, it's going to be easier for new buyers to choose the Apple product where they might have otherwise become a Creative or an iRiver customer.

If Apple does take the iPod sales total to 37m or more, whether many go on to buy new Macs or not, plenty will increasingly turn to the iTunes Music Store for content, driving that aspect of the company's business further. Munster himself has forecast Apple will have sold 1.365bn songs through ITMS by the end of 2006, allowing the content service to account for five per cent of Apple's revenues next year. ®

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