iPod sales should exceed estimates in '08

As part of his "3 Cylinder Engine" report on Apple's three core product lines, Piper Jaffray analyst Gene Munster recently looked at Apple's iPod, discussing the business unit's growth trajectory, upcoming iPods and more. Saying that the iPod will be a slower growing segment than the Mac or iPhone, Munster expects iPod unit growth to be flat in the calendar year 2008, but also thinks that Apple can maintain iPod unit growth and slightly exceed street expectations. Munster believes that the iPhone will replace the iPod as a driver of significant growth for the company.

The street expects iPod unit growth to be about 53 million in 2008, essentially flat year over year. Munster says "We disagree (with the street). We believe Apple can maintain iPod unit growth and slightly exceed Street expectations for the full year. While we do not believe the iPod will return to a high growth business (20%+), we do believe it will remain a growing segment (~10%)."

In terms of driving growth, Munster believes that new features and lower prices will be primary catalysts. Among the new feature prospects is the SDK, which will enable games and productivity applications for the iPod touch. Munster also expects Apple to release new Wi-Fi enabled, touchscreen iPods in the sub-$200 range by September 2008.

In a recent report, Munster predicted that Apple will sell between 9.7 million to 10.5 million iPods for the March quarter, based on the current street consensus of 10.8 million units. Munster says the outlook is a slight boost from its estimates at the one-month mark, but still represents a 4-percent year-over-year decline, based on the midpoint. Munster says that the increase is most likely due to a price drop in the iPod Shuffle in February.

Filed under: iPod, iPhone, Apple
Other story tags: business, sales, 2008, Piper Jaffray