Ipod Domination

iPod Domination
iPod is​ Dominating the​ Market,​ and There is​ More to​ Come
iPod contributes 12-14% of​ total company revenues,​ a​ number industry experts believe will continue to​ increase .​
With this increase comes pressure on​ gross margins,​ as​ the​ blended iPod gross margin of​ 20% compares unfavorably with Apple’s corporate average of​ 27-28% .​
The iPod helped augment Apple’s growth by expanding its addressable market from the​ core computer market,​ which continues to​ grow,​ but at​ slower rates .​
To increase penetration of​ the​ rapidly growing MP3 player market,​ Apple launched the​ iPod Mini internationally in​ July 2004,​ and HP’s iPod launch is​ scheduled for later in​ summer .​
Apple’s entry into the​ digital music player market (MP3 market) with its popular iPod expanded the​ company’s addressable market and signaled a​ turn in​ Apple’s strategy .​
The iPod is​ a​ cultural phenomenon that is​ capitalizing on​ the​ convergence of​ digital consumer electronics and the​ computer,​ and Apple’s position as​ an​ early mover enabled it​ to​ achieve the​ number-one position in​ the​ marketplace .​
iPod adoption continues to​ accelerate,​ with little indication of​ a​ slowdown .​
It took Apple approximately 18 months to​ sell its first million iPods,​ but its second million came in​ six months and its third million came in​ four .​
In fact,​ it​ appears that only its suppliers can slow it​ down,​ in​ particular the​ hard-drive vendors,​ which are having a​ difficult time meeting demand .​
Industry experts believe that iPod’s growth will remain strong in​ the​ foreseeable future and do not expect any significant customer fallout stemming from Apple’s inability to​ meet demand.
An analysis of​ the​ launch of​ the​ Sony Walkman in​ 1979 indicates the​ market opportunity for a​ revolutionary portable music player will remain strong for several years to​ come and Apple is​ expected to​ maintain a​ strong share for the​ next few years (unlike Sony’s experience with the​ Walkman).
While iPod and iTunes generate significant awareness of​ the​ Apple product,​ they have done little to​ grow Apple’s core Mac business .​
Experts attribute this mainly to​ Apple’s aboveaverage pricing,​ along with continued ignorance on​ the​ part of​ consumers regarding the​ compatibility of​ Windows and Mac .​
With regard to​ pricing,​ the​ average consumer desktop PC retails for $1,​019,​ which is​ $280 below Apple’s low-end price point on​ Apple’s now,​ discontinued flat-panel iMac .​
Furthermore,​ the​ industry ASP is​ falling as​ most of​ the​ growth in​ the​ market is​ taking place in​ the​ sub-$1,​000 market.
With regard to​ the​ compatibility of​ Windows and Mac OS X,​ even though Apple made a​ concerted effort to​ educate consumers about the​ ease with which these two products work together,​ it​ has fallen on​ deaf ears for the​ most part .​
Apple made some progress through its retail stores,​ where it​ estimates half of​ Mac purchases are from first-time buyers,​ but for Apple’s stock to​ work over the​ long term,​ the​ company needs to​ maintain share against Windows,​ at​ a​ minimum .​
Understandably,​ Apple wants to​ avoid selling PCs at​ a​ loss,​ but unfortunately the​ growth prospects for $1,​000-plus PCs are limited .​
This presents a​ conundrum for Apple longer term,​ but for now it​ maintains its current strategy .​
Incidentally,​ Apple’s revenue share has held much better,​ and while this is​ not an​ often-discussed topic,​ revenue share is​ probably more important than unit share .​

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