Analyst weighs in on iPod future
By Ryan Katz, Senior Editor
October 25, 2004 - In a 10-page report titled "What to Expect in Future iPods," released today to investors and obtained by Think Secret, Merrill Lynch analyst Steven Milunovich says he expects Apple will release both a Flash-based and photo iPod, but not before the end of the year. Milunovich adds that he doesn't foresee either a wireless or video iPod in the future, nor does he expect Apple to pursue the media center PC market.
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Flash-based & photo iPods
To date, information regarding Apple's Flash-based iPod efforts has been scant. Milunovich believes Apple will announce a Flash-based iPod in the first-quarter of 2005, and anticipates that it will sell for $149 as a 256MB (60 song) model. Think Secret sources, however, have confirmed that components for the device are currently in production and don't believe that Apple would sit on the product for three months, although they don't dismiss that possibility. Think Secret sources also say that Apple is considering three capacities of Flash-based iPods: 256MB, 512MB, and 1GB. Such a product line-up, which source say would range from as little as $99 to $199, would make sense given the fragmentation of the $2.6-billion Flash-based digital music player market.
In today's report, Milunovich stresses that Apple management generally imposes a November 1 deadline on new products for the holiday season. With that in mind, Milunovich says that beyond a U2-themed iPod, slated to debut at Apple's media event tomorrow, he believes Apple's holiday line-up will remain as is.
While Milunovich is quick to note that a photo iPod "makes sense" and that Apple executives he spoke with did not reject the idea of such a device, he doesn't expect Apple will release such a device until the first-half of next year. While Think Secret stands by our original photo iPod report from three weeks ago, the possibility always remains--as with any product in production--that production-snags may cause the device to miss its intended holiday season roll-out.
No video or wireless on the horizon
Milunovich dismisses the notion that a video iPod may follow after a photo iPod, echoing previous sentiments from Apple executives. "In our discussions with management about usage patterns, it is clear that a Video iPod (for playing movies) gets the thumbs down," he writes. Apple simply doesn't see a strong a device that would require users to view a movie on a small screen for an extended period of time.
Built-in Bluetooth is also not expected due to its slow transfer speeds. "Apple management does not see where Bluetooth would be used other than possible for wireless headphones, but then the headphones would need batteries." While Wi-Fi is also not seen as a viable feature due to its power requirements and relatively limited speed.
Lastly, Milunovich writes that Apple is comfortable with its AirPort Express offering and doesn't see a need to expand into Media Center PCs. While the success of the newest generation of Media Center PCs remains to be seen, their low sales ("less than 500,000 of 190 million PCs sold") combined with poor execution makes the market insignificant. "Apple believes the Media Center PC is braindead," Milunovich writes, although he is careful to add that Merrill Lynch believes "the concept of a media server should sell, but it has to be done right."