updated 04:35 pm EDT, Tue May 23, 2006
iPod expansion in infancy
Analyst firm Credit Suisse today maintained its "outperform" rating on Apple shares, despite growing concerns about future iPod growth. "We believe Apple is still in the early stages of its product expansion and that the company can grow its iPod units at least 20 percent for the foreseeable future," analyst Robert Semple wrote. Semple's prediction is based on the low penetration rate of Apple's digital media player, which is estimated to be at roughly 10 percent of PC users, or an "active installed base" of approximately 40 million iPods worldwide, according to Forbes.com.
The analyst firm notes that Europe has an estimated penetration rate of only 7.1 percent, versus 15.5 percent in the U.S, making the region an excellent opportunity for growth.
"Europe remains the biggest opportunity for Apple, in our opinion, based on its penetration rate of only 7.1 percent and similar demographics and buying patterns to the U.S.," Semple said. "However, the company has only demonstrated a moderate inclination to compete in the region, having opened only six retail stores in the U.K. and nowhere else in the region, choosing instead to leverage reseller partners."
Additionally, consumers appear to be replacing their iPods with new models at an accelerated rate, as the analyst estimates the current "lifecycle" of the iPod at approximately 1.5 years, down from two years, according to the report.
Credit Suisse compared the current rate of iPod shipments to Sony Walkman and Discman music players, weighing the possibilities for Apple.
"We believe that over time Apple's iPod can easily exceed Sony's 309 million cumulative Walkman and Discman shipments," Semple said. "For comparison, it took Sony over 10 years to sell 50 million Walkmans, while Apple reached the same milestone in half the time despite lower market share and stiffer competition."