Analyst questions iPod line, lack of content

Although some have speculated the iPhone price cut comes in response to disappointing sales of iPhone, iSuppli’s consumer research indicated that the iPhone outsold all competing smart-phone and feature-phone models in the United States in July on an individual basis. Despite the controversy, iSuppli said its teardown research indicates that Apple was generating a "robust hardware margins" at its previous $599 pricing, but that the iPhone would continue to be profitable for Apple at the new lower $399 price point.

Senior iSuppli analyst Chris Crotty was surprised that Apple didn't have any new video content announcements at special event -- especially given the recent controversial decision by NBC Universal to pull out of iTunes.

"One surprising aspect of the new nano is that Apple emphasized video at the start of its event today but did not follow through by announcing any content-related development for video," Crotty wrote. "Historically, Apple has coordinated hardware and content launches more effectively. An announcement involving video may have also diffused any of the potential fall-out resulting from Apple’s recent quarrel with NBC, which will no longer be distributing its content through iTunes."

While Jobs indicated his desire for NBC Universal to return to iTunes, some analyst believe the divorce hurts Apple more than the studio.

iSuppli questions Apple's product choices

The senior analyst for iSuppli's consumer electronics also questioned Apple's iPod classic and iPod touch line-ups, saying that the continuation of the iPod classic product line was a "stop-gap measure" until the company could add enough flash memory at an affordable price to provide high-capacity options.

"It raises the question of why a company would offer its best display, needed for videos—particularly movies—without employing the corresponding high storage capacities useful for video storage," Crotty opined. "Why was Apple against the idea of an iPod Touch with a hard drive? It seems like Apple had anticipated flash prices being lower and being able to offer higher capacities for the iPod Touch."

Crotty, however, was upbeat about Apple's new WiFi features and hi-res screen, although rivals such as Microsoft and SanDisk have already introduced them to the market. He complimented Apple on its execution of the new features, sayin gthat Apple’s Wi-Fi implementation is "more powerful" than those of its competitors.

In addition, iSuppli believes that the Apple's newly announced partnership with Starbucks ties into the Cupertino-based company's longtime iPod strategy of selling content at break-even prices to support sales of its high margin players and increasing switching costs among its customers. NBC Universal last week cited the same strategy -- in its public jousting -- saying it was at odds with the success of its content partners.

Filed under: Apple