EXCLUSIVE: 'iPod sales hit 23.5 million by 2006' - analyst
By Jonny Evans
A leading Wall Street analyst expects 100 million Windows users to own iPods by 2008.
In a 27-page note released to clients, Needham & Co. analyst Charles Wolf revealed that, when such critical mass is achieved, "Mac sales could surge if only a nominal fraction of this group make a purchase."
While Apple has remained tight-lipped concerning claims that it intends releasing a flash-based iPod, Wolf says: "Although we expect hard drive players to capture an increasing share of the portable music player market, flash players should dominate the market through 2006."
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Conservative assessments
Wolf's analysis and raised target price are not dependent on an iPod halo effect, nor on Apple maintaining an 80 per cent share in the hard drive-based music player market and 70 per cent of the music download market. Nor does it depend on any future iPod flash product release.
Wolf also describes Apple's online and brick-&-mortar retail stores as "the unsung heroes of the Apple story".
In fact, Wolf's account relies on the assumption that a truly competitive product will debut on the market, and that Apple's share will slide to 60 per cent. He predicts that Apple will be able to compete with that future challenge on price, because it will be able to benefit from economies of scale, attracting lower production costs than competitors can access, due to iPod's massive sales volume.
PC installation on the rise
Wolf estimates that the installed base of personal computers could reach 1.3 billion by 2010. And he believes that, since a PC is required to use an iPod or other music player, such continued consumer take-up will propel sales.
"Our analysis indicates that the installed base of portable music players could approach 500 million by 2010, equivalent to a 7 per cent penetration rate of the worlds population."
The Microsoft choice 'ignores reality'
Microsoft argues that consumers want choice in their online music purchases, and will eventually favour non-Apple devices. Wolf declares that the Redmond company's assessment, "ignores reality".
Wolf does not believe music lovers care about music formats when they buy songs, and that most songs are ripped from CDs or downloaded elsewhere. He argues that consumers don't care which online service they use, as long as it has what they want and is compatible with their device, and adds that content will not drive a single standard service to emerge, as music content will be identically-available on multiple services.
"There are no compelling economic reasons why Microsofts Windows Media Audio music software platform should end up dominating this market just because its been adopted by a host of online music stores and music players", he writes.
"In our opinion, the only way Windows Media could emerge as the dominant platform is if Apple stops innovating its iTunes software and the iPod," he states.
Simply the best
"Were forecasting iPod sales of 23.5 million units in 2006," Wolf adds.
And now sometimes I include a DS.
