Halo effect confidence

Financial research firm Piper Jaffray today expressed confidence in the iPod's so-called "halo-effect," following the release of Mac sales numbers for the March quarter yesterday. Apple shipped over one million Macs in the second quarter of fiscal 2005, a 43 percent increase from the year-ago quarter. Apple sold 1,070,000 million Macs, beating Piper Jaffray's estimate of 930,000 units. "We believe the halo effect is the primary driver of upside to Mac units. We expect the halo effect to accelerate in 2005 as the total installed base of iPods increases." The firm estimates the number of iPod users to reach 35 million by the end of calendar 2005, up from 10 million at the end of 2004. "iPod unit sales were 5.3 million for the quarter, we had been modeling for 3.8 million total units." (Earlier today, Merrill Lynch said it felt there was now " of the halo effect.")

Piper Jaffray says it believes $0.28 EPS guidance for the June quarter is conservative for two reasons. First, "Apple is gaining share with both Mac and iPod and we expect these market-share gains will continue." Second, "Apple has given conservative guidance in the last three quarters." The March quarter
original guidance was $0.20 and the company reported $0.34.

(Also see: our report from Apple's second quarter earnings conference.)

Mac mini, iPod shuffle exceed expectations

Regarding Apple's recently-released iPod shuffle and Mac mini, the firm said it estimates the number of units sold greatly exceeds early projections. "We estimate total shuffle units for the March quarter were approximately 1.8m, compared to our 1.0m estimate." NPD estimates that for the month of February iPod shuffle market share for flash-based devices was a staggering 43 percent, up from 0 percent in December. "We estimate total Mac mini units sold in the March quarter were 138k vs. our estimate of 50k. We believe the Mac mini is benefiting from iPod carry-over."

The big picture

"Apple's domination in digital music is a critical piece to the story, but we do not believe that iPod is the only potential growth avenue for the company," the firm said. "Indirectly, we expect iPod to continue to be a foundation for growth in other parts of Apple's business." Regarding the "halo-effect," Piper Jaffray said, "It appears that this phenomenon has begun to take effect." The firm said its confidence in iPod -to- Mac carryover was based partly on a survey of 200 iPod users. "We believe iPod carry-over will impact numbers in FY05 and FY06. For FY05 and FY06, our Mac estimates reflect the assumption that iPod buyers who are PC owners will increasingly
move to the Mac platform."

by MacNN Staff