Would $100 iPod compete or cannibalise? - News - Business

To print: Select File and then Print from your browser's menu

--------------------------------------------------------------
This story was printed from ZDNet Australia.
--------------------------------------------------------------

Would $100 iPod compete or cannibalise?

By Paul Festa, Special to ZDNet
December 31, 2003
URL: http://www.zdnet.com.au/news/business/soa/Would-100-iPod-compete-or-cannibalise-/0,139023166,120282276,00.htm

With rumours rife that Apple Computer will unveil a US$100 music player at Macworld Expo next month, analysts are split on the likelihood--and wisdom--of such a move.

The widely reported rumours, which Apple declined to address, suggest that the company will unveil an inexpensive iPod that will cover the end of the market dominated by cheaper MP3 players from Creative, Rio and Dell.

The risk in such a move would be undercutting brisk sales of iPods, which now range in price from US$299 for a 10GB drive to US$499 for a 40GB drive. In Apple's fourth quarter, ended Sept. 27, sales of the iPod generated US$121 million in revenue, up 9 percent from the prior quarter and 128 percent from a year ago. The company has said the iPod business is profitable.

"I don't think Apple currently needs to sell a US$100 iPod at risk of cannibalising sales of existing models and sacrificing gross margins," said Tim Deal, analyst with Technology Business Research in Hampton, N.H. "Apple already has the market lead, so I don't see the need for (the US$100 version) when people are buying US$299 and US$399 models."

Still, other industry analysts think Apple will find more benefit than risk in a low-end iPod, which is expected to be flash memory-based.

"At US$100, they would make excellent penetration into the flash market," said Ross Rubin, an analyst with eMarketer in New York City. "If the rumours are true about mini-iPods, it's a great opportunity for them to extend their brand toward a more-affordable player. Apple hasn't been the value leader in digital music. They've been the high-end. But they have stolen the category away from the Rio brand."

Other rumours suggest Apple will introduce new colours or perhaps replaceable skins for the iPod. And some analysts speculate that the company might announce - if not at this coming Macworld then later in the year - a media player for music and movies. Microsoft has detailed its plans for such a device, and products already exist from RCA and Archos.

"There's little question in my mind Apple will put out a portable media player this year (2004)," said Rob Enderle, analyst with the Enderle Group. "It's important to (Apple Chief Executive) Steve (Jobs) to get there first."