PJ on iPod, Napster

Piper Jaffray Senior Research Analyst Gene Munster concludes "recent competitive rumblings from Sony and Yahoo! have created a buying window for shares of AAPL ahead of what we believe will be a solid March quarter and June guidance," highlighted by the emerging "halo" effect. The firm says that despite product introductions from Sony and Yahoo!, "Apple's competitive position is strong and in some segments may become even stronger."

"Sony Still Playing Catch-Up"



Earlier this week, Sony announced that will compete with the iPod shuffle. Several of the devices will be officially available in mid-March, while others will ship in May. "Ultimately, we believe Sony will only be successful at chipping away at iPod market share if a significant amount of highly effective advertising is done and the devices that Sony creates offer functionality benefits over the iPod," says Piper Jaffray. However, "a shift in consumers' appetites would take a minimum of
several quarters to achieve." The Sony devices have similar capacity and pricing, but claim significantly better battery life than the iPod. Sony's devices will work exclusively with the Sony Connect music service, while the iPod is exclusive to iTunes.



Apple's head start "significant"



"Apple's head start in this market is so significant that we would expect the company could
sell 20 million more iPods before Sony, or other potential competitors, start materially impacting the market, which is a good worst-case scenario." Meanwhile, the firm questions the potential success of the Yahoo! music store, because "the success of online music services is fundamentally tied to the success of compatible portable audio devices." The Yahoo! music service will be compatible with various Windows-based devices, most of which currently hold minimal market share. "We expect iTunes will maintain leading market share for, a minimum of, several quarters due to the continued success of the device that is the fuel for the service: the iPod."



Napster-To-Go has important "first-mover advantage"



Piper Jaffray points to the "successful launch" of the Napster-To-Go service, stating the service is "easy to navigate and primarily problem-free." However, "Napster-To-Go will be closely tied to the success of compatible non-iPod portable audio devices. We believe it is positive that Napster has created alliances with several of the major non-iPod device manufacturers." The firm says it does not expect non-iPod devices to "exhibit material penetration" in the first half of 2005, but increasing success of non-iPod in the second half of 2005 could have a "subsequent impact on Napster subscriber growth." Napster-To-Go enabled players are expected to go from fewer than 10 devices today to more than 50 by fall 2005.

by MacNN Staff