As users avoid upgrading iPods in this economy, sales fell nearly 10% in April. Can upcoming Zunes finish iPods off?

Feature teaser: iPod classic with headphones

Late yesterday, the NPD Group and Piper Jaffray have released estimates of iPod and Mac performances during April that reveal both brands continue experiencing the decline amid tough economical conditions. NPD’s estimates put both iPod and Mac sales during April down 9 percent and 1.8 percent, respectively.

NPD’s figures have prompted Piper Jaffray’s resident Mac analyst Gene Munster to realign his previous estimates that called for more than fivefold decline in Mac sales during April, or 10 percent.

The analyst is now modeling for Mac sales shrinkage between 16 percent and eight percent during the June quarter, estimating that Apple might ship between 2.1 to 2.3 million Mac units during the quarter.

Munster’s new estimate fits within general Wall Street consensus of quarterly Mac sales decline between 10 percent and seven percent. For reference, Apple shipped nearly 2,5 million Macs in the June 2008 quarter.

Similarly, Munster has revised his iPod estimates, now modeled around an estimated 9.5 to 10.5 million iPod units for the June quarter, in line with the Street’s figures, versus the 11 million units that Apple shipped in the year-ago quarter.

Even before the recession hit, Apple has been suffering from virtually flat iPod sales, usually within low-range, single-digit figures.

Most analysts explain the deceleration in iPod sales with three key factors:

Overall market saturation, the lack of innovation on Apple’s part due to the company’s commanding lead of the music player market and the arrival of advanced smartphones with music player capabilities that have been cannibalizing sales of standalone MP3 players.

The latter has undoubtedly prompted some from abandoning the iPod altogether in favor of the iPhone. On top of that, effects of the recession helped greatly accelerate iPod’s free fall.

Mac sales

  • NPD: down 1.8 percent from April 2008
  • Piper Jaffray: 2.1 to 2.3 million Mac units in Q3F09 (down between 16 percent and 8 percent from Q3F08)
  • Wall Street: Mac sales down between 10 percent and 7 percent in Q3F09
  • Apple: 2,496,000 Macs sold during Q3F08 (annual growth of 41 percent in units and 43 percent in revenue)

iPod sales

  • NPD: down 9 percent from April 2008
  • Piper Jaffray: 9.5 to 10.5 million iPod units in Q3F09
  • Apple: 11,011,000 iPods sold during Q3F08 (annual growth of 12 percent in units and 7 percent in revenue)

No worries for the Mac brand

You should take this estimates with a grain of salt as there is still a month and a half before we reach the end of the June quarter.

While the money-making machine that is Apple doesn’t settle for anything but the continuous growth, the company should be happy that its premium Mac brand doesn’t feel as severe repercussions of the recession as the rest of the industry.

For example, Mac sales fell three percent during the previous quarter versus the seven percent decline for the rest of the industry. Still, that’s a far cry from last fall.

As of October 2008, Macs have outgrew overall market 14 of last 15 quarters, falling just once bellow the industry average in the second fiscal 2006 quarter, when Apple began transitioning to Intel processors.

The fact that analysts’ estimates for the June quarter do fall in line with the Street’s expectations is an encouraging sign, indeed.

Positive effects of recent hardware refresh of consumer Mac desktops should help Apple stay above the industry average throughout the June quarter, but there are no guarantees as pent-up demand for refreshed Macs may fade soon.

Is the iPod Endangered?

The iPod, however, is suffering from more worrying decline as Apple is finding increasingly tough to convince consumers each year to upgrade to new iPod models, especially with the economy like this.

Camera-enabled iPods, that are supposedly in the works, serve as another indication that redesign alone and software-based feature set combo isn’t enough to lure users into purchase.

The diminutive iPod shuffle with VoiceOver feature unveiled in January has raised the ticket price to an iPod world from $49 to $79.

However, popularity of the player has had negative impact on an average selling price of iPods.

Tear-down analysis by the research company iSuppli revealed that each iPod shuffle units cost only $22 to manufacture, meaning the miniature player is Apple’s most profitable iPod yet.

That said, it will be interesting to see if total iPod sales during the June quarter will stumble significantly, as some fear now.

If Apple’s iPod accelerates its free-fall, this will create an opportunity for a rumored, touch-enabled Zune HD to take the market by the surprise and monetize on Apple’s weakness.

iPhone sales: The big unknown

Although NPD and Piper Jaffray haven’t yet estimated April iPhone sales, analysts and investors are undoubtedly closely tracking the performance of Apple’s handset. Last year, Apple shipped 717,000 iPhone units during the June quarter, up from 270,000 units moved in the year-ago quarter.

However, weak iPhone sales this time last year were expected. When the company released the iPhone SDK in March of 2008 and announced the App Store, most customers put off their purchase in anticipation of then rumored 3G-enabled iPhone released later, in July of 2008.

Zune HD mockup obtained by Engadget.

This year, a similar scenario unfolds as Apple unveiled betas of the iPhone SDK 2.0 and the iPhone OS 3.0, both of which are expected for consumer release at the WWDC scheduled to run between June 8-12, when the company is expected to refresh iPhones as well.

While this fact may also force some consumers to hold off planned iPhone  purchases until a new model arrives, the effects on quarterly iPhone sales won’t be nearly as drastic as last year.

Will rivals stretch Apple to its limits?

With Apple’s handset now in 80 countries around the world, coupled with aggressive promotions by carriers designed to clear inventory ahead of new models launch, sales of iPhone shouldn’t wiggle much. That isn’t to say that investors shouldn’t carefully watch the iPhone performance during the quarter – on the contrary.

With new Android devices slated for arrival during the June quarter, most notably G2 code-named Magic and Palm’s Pre geared for June 6, in addition to Nokia N97 and several other smartphones viewed as iPhone-killers, investors should look for any sign of weakness in Apple’s iPhone ecosystem and negative impact of rival launches on iPhone sales.

Published On: May 19th, 2009 / Categories: APPLE / Tags: , , , , /