Barron's: Music-Ready Cellphones Will Hurt Apple iPod Sales

by , 12:15 AM EDT, June 27th, 2005

Apple Computer (AAPL) stock is expected to take a hit Monday after a Barron's newspaper report (subscription required) concluded that as more cellphone companies add the capability of downloading and playing music, sales of the popular iPod digital media device will slow.

The report said that by 2006, many new handsets will carry software, circuitry and data storage for portable music. It said this will let people download songs from personal computers, like iPods, but also download music via a wireless connection to competing music services.

"While optimists think Apple could sell 45 million iPods next year, mobile-phone makers will be selling more than 750 million handsets," wrote Bill Alpert in a store entitled 'Bites Off the Apple'. "All those handsets could weigh on the iPod's growth prospects -- and Apple's premium stock valuation. Cellphone users won't need to lug around a second gadget to have their music."

The report went on to say it will be sad to see the iPod "overtaken by the common cellphone" and quoted an industry executive as saying he sees a day not too soon away where Apple's marketshare of the digital music business could shrink from 90% to just a few percent.

The report said that Apple's dominance with the iPod will dwindle slowly as today's mobile phones sold in the U.S. don't have, and will not have for some time, the capacity to store as many songs as an iPod. In addition, the report said it will be some time before state-of-the-art, third-generation wireless networks are in place in the U.S. that offer more reliable and faster downloads of music files.

Barron's said an Apple spokesperson "declined to discuss looming competition from cellphones, after the newspaper had tried for several weeks to get comment."