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AAPL Stock: 102.47 ( + 2.71 )

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Apple\'s future: Mac sales growth, subscription model?

updated 12:45 pm EDT, Fri May 13, 2005

ML reiterates Buy on AAPL

Apple's future is more than iPods, according to one analyst who believes that recent earlier this week.

Merrill analyst Steven Milunovich said that smaller competitors such as Real Networks and Napster may see more of a direct negative impact by the launch of Yahoo's service. The firm believes that Yahoo's entry into the increasingly crowded digital music space may push Apple to offer its own subscription service later this year, but that Yahoo's service may have its own drawbacks, including Yahoo's use of advertising, the lack of interest in current WMA-supported music players, and a possible backlash when its introductory pricing ends.

"Apple could flick the switch on a subscription model. Yahoo clearly is a problem for Real Networks and Napster, but will it hurt Apple? We do think Yahoo's entry could cause Apple to offer iTunes as a subscription model later this year, especially if there is evidence of share loss. Subscriptions are about 15% of the legal download market with iTunes over 70%," according to the research note.

The research firm also said that Apple's management is seing more evidence of the halo effect, although it did not provide any further details. Merrill "conservatively" estimates that the effect could drive "sustainable growth rate" of Mac revenue by 15-20 percent, based on its model.

Merrill said that a influx of perceived negative news impacting Apple was mounting--citing Bill Gates' recent declaration that mobile phones will replace the iPod as customers' preferred listening device (in addition to the recent Yahoo launch). While news has been affecting

Apple is working to protect iPod profits, according to the firm: "Although we think the iPod franchise is safe for at least the next year, the driver of the stock increasingly will be Mac sales." Merrill reiterated its "Buy" rating with a price target of $51 per share.




by MacNN Staff

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Comments

  1. finknottle

    Joined: Dec 1969

    0

    Subscription..

    I for one would go for that on condition that they still had the option to but outright songs.

  1. benhur

    Joined: Dec 1969

    0

    I second that

    I think the Yahoo service gets it right. If it has a good user interface and ease of use, I think it represents a serious challange to iTunes. iPod or not. I have an iPod and a shuffle but really want an FM tuner on my player and to be able to sample more music. A subscription lets me do that and Yahoo still lets me buy the song.

  1. CyclotronX

    Joined: Dec 1969

    0

    Not for Apple Users

    Like the rest of Yahoo, what ever they do it will probably be unusable for Mac users.

  1. klinux

    Joined: Dec 1969

    0

    Yes they do

    If you RTFA or go to the site, you will find that you do have the right to burn songs for 79 cents. ******* I too wish all of Yahoo's property work on OS X but Cyclotronx is absolutely incorrect when he made the statement rest of Yahoo is unusable for Mac users. Maybe just not workable to idiot Mac whiners?

  1. aristotles

    Joined: Dec 1969

    0

    Do the math klinux

    You have to buy more than 3001 songs per year in order for the discount of 79cents to be cheaper than their regular 99 cent service or iTMS (which is also 99 cents.

    I only buy on average 1-2 songs per money. So 5 bucks would be expensive.

  1. klinux

    Joined: Dec 1969

    0

    U do the math

    Did you not factor in the value of access to the catalog?

    As I said many times before, subcription is not meant to replace the single song model.

    If you only listen to the songs you ALREADY have and no more, then obvious subscription is not right for you. If you want to listen to many new songs you do not have AND want to burn song, then Yahoo! Music Engine may be right for you.

  1. westmedia7

    Joined: Dec 1969

    0

    Subscription?...

    Apple already has internet-based subscription experience.

    .Mac!

    It has had it's ups and downs, but it's conceivable that they could offer .Mac subs access to music (or video) on demand. It all several sets of WebObjects apps. They wouldn't even need to commit to the idea full bore like the other guys, and users can maintain all the benefits they have now. just another addition to the table.

    Imagine: Incredibles... now showing in .Mac....

    Carlos

  1. aristotles

    Joined: Dec 1969

    0

    Access to the catalog?

    I can get previews for free on iTMS "and" use the multitude of streams on the "radio" feature of iTunes for "free".

    D you "rent" CDs? If you are really so hard up on having access to a larger collection of music, try your local library. It's "free".

  1. klinux

    Joined: Dec 1969

    0

    Sigh

    Both you and I know that the preview is for 30 seconds which is not the same as able to listen to the whole song. You should also know that radio = someone schedules the music which is different than one scheduling one's own music.

    My question is that I think you know these answers as well. So are you just arguing for arguing's sake? Or do you just like to use "quotes"?

    For your information, I listen to classical music. And I do go to my local library to access its large of classical records. I occasionally listen to hip-hop, pop, r&b, rock, etc and do not own many of those CDs therefore, radio and subscription works for me. Satisfied?

  1. lkrupp

    Joined: Dec 1969

    0

    Subscription doesn't wor

    Everybody is clamoring for the "subscription" business model BUT it has already failed! Napster is oozing money, something like $23 million last quarter. Real is flopping about. Remember when Wal-Mart was presented as the iTMS killer? (are they even subscription anyway?)

    The subscription model is doing diddly-squat. Why would Apple move in that direction?

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