Needham looks at failed HP iPod deal

It's impossible to place blame for the failure of the Apple-HP partnership to sell iPods, Needham analyst Charles Wolf said in a report today. "HP’s strategy to enhance the iPod with brightly colored paper covers was hardly consistent with the company’s desired image of an innovative company. And despite the opportunity to sell the iPod abroad in markets Apple could not reach, HP appears to have confined its sales to US retailers." Of course, other factors may have also affected the decision to end the partnership. "The relationship between Apple and HP undoubtedly deteriorated when Apple began to expand the iPod’s presence into retail outlets, such as Radio Shack and Wal-Mart, that already stocked HP’s version of the product."

"In recent quarters, HP’s sales of the iPod amounted to about 5% of total iPod sales. With HP and Apple selling in many of the same stores, HP’s incremental contribution was probably close to zero. In short, HP’s departure is unlikely to have more than a nominal impact on iPod sales."

"In the US, at least, Apple discovered that HP’s broader retail presence was redundant. In addition, Apple reportedly did not extend price protection to the iPod’s sold by HP. Price protection refers to the practice of compensating retailers for any price reductions on a product held in inventory."


"In our opinion, HP missed a golden opportunity to capture a material percentage of iPod sales by not rolling out the diminutive device to its retail outlets abroad."

Filed under: iPod