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First on TMO - Analyst Reiterates Apple to Make Flash-Based Player; SigmaTel Stocks Soars

by , 4:45 PM EDT, October 20th, 2004

Following the report of strong third quarter earnings Tuesday, Thomas Weisel market analyst Jason Pflaum reiterated to clients Wednesday his confidence that semiconductor maker SigmaTel will supply chips for a flash-based music player from Apple Computer that will be released before Christmas.

In an interview with The Mac Observer, Mr. Pflaum cited various sources in Asia for his continued confidence that Apple will release a flash-based player.

"I recently spent two weeks in Asia meeting with a number of folks who are in a position to know details of SigmaTel's supply chain," he said in an exclusive interview with TMO. "Based on our industry contacts, we are confident that one, Apple is planning to launch a flash-based player, and two, SigmaTel is the provider of controller chip for that device.

"Apple's entry (into the flash-based player market) could upset the OEM (original equipment manufacturing) apple cart as the first true 'branded' entrant," he wrote to clients in a report obtained independently by TMO.

Mr. Pflaum is estimating such a manufacturing deal with Apple could be a US$2 to $4 million revenue opportunity for SigmaTel. "The forecast is conservative at best," he told TMO. He said SigmaTel is prepared to meet whatever the demand Apple throws at them to make a new flash-based player. SigmaTel does not manufacturer its own chips, but outsources production to companies in Asia.

Mr. Pflaum believes the product is already in production and will be released by Apple for the Christmas buying season.

"It's a very tight supply chain, but I think this product from Apple will come out by the end of the year," he said. "That could obviously change, but we're pretty confident this will happen and you'll see product on the shelves in December."

SigmaTel officials refused comment on the report. It is Apple's policy to not comment on product strategy.

The SigmaTel-made controller is basically a 'system-on-a-chip' solution that acts as the brains of a flash-based device. Unlike Apple's hugely popular iPod and iPod mini players, the new player would presumably use solid-state flash memory, which has less capacity than hard drive-based players but can make for a lighter and cheaper player.

Mr. Pflaum said SigmaTel is currently the market leader is providing controller chips to flash-based MP3 players worldwide, with a 65% market share.

Sigmatel shares leaped Wednesday, after the semiconductor company surpassed earnings expectations for the third quarter. Excluding items, SigmaTel, based in Austin, Texas, reported earnings of US37 cents a share, which was well above projected earnings of 29 cents a share that had been forecast, on average, in a Thomson First Call survey of analysts.

Shares of SigmaTel (SGTL) closed Wednesday at $28.23, up $4.80, or 20.49%, on volume of 5.3 million shares.

Lending further credance to reports of a flash-based Apple player this quarter is the SigmaTel estimate of a fourth-quarter profit of between 35 cents and 40 cents a share, on revenue of between $55 million and $60 million. Analysts were expecting a profit of 30 cents a share on $44.9 million in revenue.

Thomas Weisel has an investment banking relationship with SigmaTel. Mr. Pflaum does not cover Apple Computer as an analyst for Thomas Weisel.

Observer Comments

Show: Subjects Only | Full Comments
View Name:Guest
Subject: One Step at A Time…
Close Name:kenaustus Posts: 601 Joined: 27 Jun 2003
Subject: Better hold onto my Apple stock

Just wished I had bought more at $14.85!

This could really blow the market apart if there is sufficient inventory to even partially meet demand. Can you hear the moans in various board rooms and CEO office when they just THINK about it? The potential volume for a flash based iPod is probably 2 - 3 million for the Christmas buying season. Hope the factories are going 24 hours a day!

View Name:Guest
Subject: iPod! Watch Out!
Close Name:Bleep Posts: 29 Joined: 23 Sep 2004
Subject: Wrong

That is not direct competition.

Close Name:jacrav Posts: 268 Joined: 04 Jul 2001
Subject: Yeah ! Great !

10 Mpixel phone-camera big risk for Apple … !?!?!?
Where do they put the CCD ? in an accessory case ?
And to think I just invested in a Canon EOS Rebel a few months ago !
But yet, I’m glad I haven’t bought an iPod yet, so I can get this wonder phone from Samsung (and a sackful of their 32 MB “accessory cards” to accommodate the pictures I might take-2 cards per picture or something like that ?)
Now who gets the 92 MB on-board memory ? the iPod-killer MP3 player or the MPA/QT video ?
All in all, a pretty weird article from Yahoo-UK … but thanks, anyway, Guest.

Close Name:DawnTreader -   TMO Staff Posts: 13424 Joined: 04 Jan 2002
Subject:

SGTL's market cap is now about $1 billion. The heavy move up is in response to both specualtion on a new iPod and a stellar financial quarter.

Supplies are tight, but we'll see if Apple can secure enough components to introduce a product before Christmas.

View Name:RealityCheck -   Troll Posts: 392 Joined: 06 May 2004
Subject: Remember Steve's RDF That Flash Players Are Too Small
Close Name:DawnTreader -   TMO Staff Posts: 13424 Joined: 04 Jan 2002
Subject: Re: Remember Steve's RDF That Flash Players Are Too Small

Quote
RealityCheck wrote:
It wasn't that long ago when Steve Jobs told the Mac faithful that customers really don't want a player that holds less than a 1000 songs.


6 million hard drive-based iPods later, Steve Jobs is right

For the few who would prefer a smaller capacity product, Apple is more than happy to meet their need.

Close Name:John F. Braun -   TMO Staff Posts: 227 Joined: 11 Jun 2001
Subject: Bad Steve!

Quote
RealityCheck wrote:
It wasn't that long ago when Steve Jobs told the Mac faithful that customers really don't want a player that holds less than a 1000 songs. The RDF was that customers don't want to manage what songs to put on their players. Of course now that Apple is making a flash player song capacity is no longer a problem. Wonder why Mac zealots have such a bad reputation.


That dastardly Steve Jobs! If customers have in fact stated a desire for a player that holds less than 1000 songs, he's got some nerve listening to them! Although it seems the flash technology is at a point where you can get a 4 GB module, same size as the iPod mini.

As for those darn zealots, I'd agree that those of any stripe give a platform a bad name. RC has done wonders for the reputation of Windows fanboys everywhere.

Close Name:dwallin Posts: 20 Joined: 31 Oct 2002
Subject: Flash iPod

If I were still part of Apple, I would wait until I could release a flash player with 4GB memory, then sell the best on the market...

That would fit with the market position of the iPod and the understanding of the customer need - 1,000 songs.

Just my two pennorth...

--
Dick

Close Name:Biff Posts: 1479 Joined: 08 Apr 2004
Subject: LOL

Quote
Guest wrote:
The going could get rough in the next couple quarters.

http://uk.news.yahoo.com/041020/323/f4wod.html
LOL thats one of the funniest posts anyone has made in a long time.

View Name:Guest
Subject: Re - Flash memory
View Name:Guest
Subject: but what about the mini
Close Name:acdc1174 Posts: 669 Joined: 16 Apr 2004
Subject: I'm liking this idea more and more.

iPod Micro- a 1-2 GB flash based music system about the size of a business card. It holds 250-500 songs. It comes with earbuds, FW cable, "micro-dock" and an armband for carry at the gym or while you are out running. Priced at $100-149.00. If we see something along these lines, we might be looking at at Rio/Lyra killer.

Close Name:kenaustus Posts: 601 Joined: 27 Jun 2003
Subject: Dual chips?

What is to keep Apple from using two 2 gig chips? Results in a 4 gig micro and puts pressure of the memory makers to come to the party in the future. Lets you have both 2 and 4 gig versions and price points. 2 gigs, by the way, would handle a lot of users who don't want to have a large pile of CDs in at one time.

View Name:Guest
Subject: Here's a thought...
Close Name:Biff Posts: 1479 Joined: 08 Apr 2004
Subject:

Quote
Guest wrote:
I wonder if this might be a plan...

Apple makes a flash player that supports mp3, AAC and wma (the Janus crap), maybe even OGG, and is compatible with other download sites...

Haha you're kidding right?

View Name:Guest
Subject: even better. . .
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