TMO Reports - Analyst: 'New shuffle Will Have a Material Impact on iPod Units Sold'

by , 1:30 PM EST, November 22nd, 2006

Piper Jaffray analyst Gene Munster currently expects Apple to sell 14.7 million iPods during its current fiscal quarter, "but it is likely that the new shuffle will have a material impact on iPod units sold, potentially leading to upside to our estimate," he wrote in a research report he issued on Wednesday.

"Our checks show that initial interest is strong," the analyst explained. "If Apple is able to ramp supply to indirect channels, our estimates could be low." He also found, during checks with 40 big-box retailers, that 70% of clerks are pointing to iPods when asked to suggest an MP3 player under US$200. That's up from 52% this past June and 38% a year ago. SanDisk players are suggested by 13% of clerks and Creative devices are suggested by 10% of them, with Sony and Samsung bringing up the rear at 5% and 3%, respectively.

However, among those same retailers, demand for the new iPod shuffle seems to be outpacing supply, with many of them sold out. Amazon.com and Target.com are also sold out, while Apple's online store has the shuffle listed as the only iPod not ready to ship within 24 hours. Mr. Munster's checks with 20 Apple retail stores, though, showed that all of them have at least 50 units available as they head into the busy Thanksgiving weekend shopping spree.

The analyst noted: "In other words, once again, Apple seems to be keeping the inventory of its hot new items within its direct channel until it can ramp up enough supply to cover both direct and indirect."

Price seems to be the most important factor impacting iPod shuffle sales, Mr. Munster said. "We believe that Apple geared its product pipeline around the idea that cheaper players enjoy favorable seasonality during the holidays," he wrote. "It seems that gift givers buy cheaper items when buying for others, and the shuffle sales trends support this notion."

The analyst retained his "Outperform" rating on Apple's stock, with a $99 price target. At 1:30 PM EST on Wednesday, the company's shares were selling for $89.69, up 1.23% for the day.

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