Analyst: Sony is Apple’s "Serious Competitor"

March 8th, 2005 at 2:00 PM - Apple Stock Watch by Bryan Chaffin

Apple Computeris most serious competition in the digital media device market is Sony, according to a Wall Street analyst. In a research note obtained by The Mac Observer, Gene Munster of Merrill Lynch told clients that Sonyis new music players are likely to be solid sellers, but that they "donit support iTunes and do not have the cache of an iPod."

On the plus side, he noted that Sonyis new flash-memory music players have a small LCD screen, which the iPod shuffle lacks, but counted as a detriment the fact that they can not work with iTunes or the iTunes Music Store, and donit have rechargeable batteries.

"We view Sony as the most serious competitor," he summarized, "but since Apple will be supply-constrained on shuffle it will be difficult to assess the impact in the near term."

Dealing with the new hot-button topic of subscription music services eating into Appleis share of the music download business, Mr. Munster also told his clients that he didnit think that Napster will have a big impact on Apple with its Napster to Go service.

"We are not big believers in the subscription model where consumers pay indefinitely to listen to their favorite songs," he wrote.

More important, he noted that if he, and by extension Apple, is wrong about this, that "Apple can establish a subscription service with few barriers to entry."

The research note reiterated Mr. Munsteris Buy rating on Apple with a price objective of US$51 per share. Mr. Munster has been the most bullish of all the analysts covering Apple, and was the first to put a price target for the company at $50, split adjusted.

Appleis stock fell more than 5% Tuesday on worries about Sonyis new music players, and is trading another 3.5% lower in very heavy volume today.

*In the interest of full disclosure, the author holds a small share in APPL stock that was not an influence in the creation of this article.  

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