Analyst: iPod sales may hit 500 million

Apple will likely pass up the 350 million sales Sony achieved with its Walkman players from the 1980's to 1990's, and may exceed the half billion mark before desire for the portable players begins to decline, according to one research analyst. Ingrid Ebeling, an analyst for JMP Securities, provided a preview of Apple's fiscal second quarter results due April 25th in a research note obtained by AppleInsider. "During Sony's 15-year reign with the Walkman, the company sold over 350 million units, and we believe that Apple's addressable market over time will exceed this number given the upgrade and replaceable nature of iPods as well as the overriding trend of consumers' increasing use of digital media," Ebeling wrote.

"The net takeaway is that this is a product category that is far from saturated, and we believe well over 500 million units will be sold before the product category hits maturation."

The analyst said checks point to lower iPod sales between the months of January and February, citing unusually strong January sales and iTunes gift card purchases as an explanation for the decline. Ebeling believes that Apple sold roughly 10.8 million iPods for the three-month fiscal quarter ending in March, generating about $1.76 billion in revenue for a year-over-year growth in units of 33 percent and revenue growth of 18.2 percent.

"First calendar quarter sales in consumer electronics are always the weakest of the year, and we wouldn't view any perceived weakness as concern for the category and iPods," the analyst noted.

Ebeling sees EMI's recent shift to non-DRM protected musical tracks as positive for Apple, as many customers who might have previously been deterred by the closed iPod+iTunes ecosystem can now purchase tracks from EMI via iTunes without worry.

The analyst expects the forthcoming release of Mac OS X 10.5 Leopard to expand Mac market share due to consumers who are holding off on purchasing a new Mac until Leopard comes pre-installed on those systems.

"Despite the initial good results of Vista with consumers, Apple's 'I'm a PC, I'm a Mac' campaign, the success of its 165-store retail strategy, the increasing use of a computer for managing digital media (one of Mac's many strengths), among other things, are all contributing to expanding market share," Ebeling said. "A contact in the education market has confirmed that his district, largely a Windows-based system, is widening its use of Macs."

The analyst forecasts Mac unit sales of 1.3 million and revenue of $1,898 for Apple's March quarter, which translates to year-over-year growth in units as well as revenue of 21 percent, according to AppleInsider.

"We believe we could be conservative with our average selling price, which we have forecasted to be just over $1,400 compared to $1,500 in the December quarter due to the shift towards higher priced laptops," Ebeling wrote, who also expressed her optimism for the Apple TV as "a sleeper hit" based on checks indicating that the $300 set top box is already off to a good start.

"So far, reviews have been generally positive, and we believe our forecast of 1.1M units through [fiscal year 2008] could be conservative, representing only 2 percent of the broadband Internet households in the US," Ebeling wrote. "While we believe the hype around the iPhone is real, we note that the Apple TV does not have nearly as many competitive products on the market as the iPhone will have, and consumers appear to be ready for technologies that bridge the gap between the PC and the HDTV and provide video on demand services."

JMP Securities reiterated its "Market Outperform" rating on Apple shares with a price target of $100. The analyst predicts that Apple will report second quarter earnings of $0.59 per share on sales of $5 billion, aided by 29.7 percent gross margins.

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