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Piper Jaffray: iPod Will Maintain its Lead 'For Years'

TMO Reports - Piper Jaffray: iPod Will Maintain its Lead 'For Years'

by , 12:20 PM EST, December 13th, 2005

While such competitors as Creative continue to nip at Apple's heels, Piper Jaffray analyst Gene Munster on Tuesday took a look at comparable MP3 players and concluded that "economies of scale support the iPod's retention of the pole position for years."

Leading off his latest research report, a copy of which was obtained by The Mac Observer, Mr. Munster looked at Creative's 30GB Zen Vision:M, which was released last week. While he said he was "impressed by the features packed into the device," the analyst noted that it sells for a price 10% higher than the cost of a 30GB iPod.

Despite the fact that the Zen Vision:M and other non-iPod devices sport more features than Apple offers, such as an FM tuner and audio recording capability, Mr. Munster felt that "none of these devices have shown that they can compete in two key areas: 1) user interface and 2) 'cool' factor." With Apple shipping such large numbers of iPods, Mr. Munster expects economies of scale to continue to enable the company to sell the iPod at a lower price than the competition.

Mr. Munster also provided a table comparing the 30GB iPod to its main competitors in the 20GB to 30GB storage capacity category. He noted that the iPod is the cheapest on a price per GB basis, at US$10 per GB, while only Creative can come close at $11 per GB. Most were no more than $15 per GB, although iRiver and Samsung each have offerings that cost $25 per GB.

Looking ahead, the analyst said he does not expect 2006 to see a slowdown in iPod innovation, despite the advances Apple made this year. He also looks to the Mac lineup as seeing more changes in 2006 than it saw in 2005, thanks to the transition to Intel processors.

Mr. Munster maintained his "Outperform" rating on Apple's stock, with a $79 12-month price target. At 12:21 PM EST on Tuesday, Apple shares were selling for $74.80, off 0.15% for the day.

If you are interested in Apple's stock, join our forum members in the Apple Finance Boards, a moderated forum for Apple Investors and people who are interested in Apple's financial dealings. For other stories regarding Apple's stock activity, visit our updated Apple Stock Watch Special Report.

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