Analysts Like Apple Mac mini; See iPod shuffle as MP3 Contender

January 10th, 2005 at 2:00 PM - Macworld Expo by Brad Gibson

SAN FRANCISCO -- Analysts who watch Apple Computer and the personal computer market for a living feel the iPod shuffle and Mac mini will help Apple solidify its music player position and gain back small fractions of its market share from Windows-based PCs.

Steve Baker, an analyst with NPD feels the Mac mini will not displace inexpensive PCs like those from eMachines and HP, but will gain market share slowly as "an adjunct US$999 notebook."

"Itis not a volume PC, "Mr. Baker said. "Itis aimed squarely at the consumer adding multiple PCs to the house and who want a small form factor."

"I donit expect the $499 Mac will greatly affect purchases of more powerful, Macs," said Joe Wilcox, an analyst with Jupiter Research. "But I do see it as a potential suitor to Windows users, particularly those that have iPods and enjoy the experience delivered by Apple. Apple might even increase market share. That said, I would discourage anyone from over-excited expectation that the Mac will surge against Windows PCs."

Mr. Baker said he doesnit think the Mac mini is a "volume shovel-ware product" that will be sold at WalMart, for instance. What he sees is interesting uses and users for the inexpensive Mac.

"I think youill see a lot of uses for this product, given the form factor and it being so quiet," Mr. Baker commented. "I can see this in a lot of environments that you normally wouldnit see. And I think education will be a big buyer."

"The Windows market is huge, with massive, entrenched infrastructure," said Mr. Wilcox. "Apple could gain a few points of share--and the planets will have to align just so, as they appear to be moving--but doubtfully denting Windows PC market share in any immediate significant way. Still, if the mass-market strategy succeeds and ekes out even a few percentage points of share, the significance could be huge for Apple."

Mr. Baker believe Apple will slowly gain "marginal" market share in the next 12 months, but is cautious.

"This is not the PC to make them competitive with HP or anyone," Mr. Baker said. "I think itis going to be a difficult sell in a mass merchandiser because they havenit bundled it with a monitor and keyboard. Best Buy could probably sell it if they wanted to."

Mr. Wilcox believes distribution could be the imake or breaki for the Mac mini.

"With iPod, Apple got many of the most important features right--size, battery life, functionality and, most importantly, synchronization," said Mr. Wilcox. "But iPodis success also comes from good distribution. Consumers can buy the music player in thousands of retail outlets, not just Apple retail stores or CompUSA. HP opened up Radio Shack, adding thousands more available locations. If Appleis initial target audience is the Windows user, then the iMac must be available where that consumer shops. Distribution needs to be broader than just Apple stores or CompUSA."

Mr. Baker also said that despite its price, retailers and customers will quickly realize the Mac mini will end up costing a lot more before it ends up on a home or office desktop.

"Itis not really a take home Mac at $499. Youire going to have to add stuff to make it usable," said Mr. Baker. As for the flash-based iPod shuffle, starting at $99, Mr. Baker believes the price is right.

"It seems to me to be targeted at those who are multiple iPod owners," Mr. Baker said. "I donit think itis likely to cause cannibalization of the iPod mini. It will be a good solid product, to help them get additional (market) share."

Mr. Baker was unwilling to take a guess at what type of share Apple could get in the first few months, but did say they will have an impact as soon as it it is available through the majority of its mass retailers like Target, Sears, Best Buy and more.

"This is a market killer at $99," said Mr. Wilcox. "Itis very aggressively priced."

"There are two buyers for this," said Mr. Wilcox. "Consumers who wonit pay $249 for a iPod mini, and existing iPod owners who want something small to run with."

Mr. Wilcox said itis important to remember that Jupiter surveys have clearly shown most U.S. consumers have far less than 1,000 songs they would want to listen to on a regular basis, "so the capacity of one gigabyte will be plenty for most," he said.

But for Mr. Wilcox, the success of the iPod shuffle -- without a display -- will come down to how easy it is to use its iTunes music software.

"If iTunes handles the workload to organize, shuffling will be fine," he said. "If it doesnit, shuffle is going to be a lot more cumbersome."

Mr. Baker cautioned his optimism of the iPod shuffle based on what happened in the past to Appleis MP3 competitors, who have previously released players with no display.

Apple is taking a big chance going without a screen," he said. "Most MP3 players that came out without screens, came back having one, like the original Creative MP3 player."

He also cautioned that the iPod shuffle not having an FM radio, could be another negative factor.

"If the iPod has reached iconic status, this product will start snatching share immediately" said Mr. Wilcox. "But it has to be as widely available as the iPod and iPod mini."