Apple’s Lead in Digital Music Tough to Beat, Analyst Says

Apple Computeris dominance in the digital music world will be a tough nut to crack for the likes of Sony, Microsoft and others as the iPod maker continues to have a "substantial lead and advantage" over its competitors, according to analyst Shaw Wu of American Technology Research.

In a report obtained by The Mac Observer, Mr. Wu said that after a sit-down meeting with Apple executives late last week, he is convinced that despite efforts by competitors to cut into its 70%-plus market share in both MP3 players and music downloads, Apple is showing no signs of faultering.

"Progress is being made by the Windows Media camp (to cut into Appleis lead), but coordination and integration are proving difficult because of the many vendors involved including systems, semiconductor, software, content, and service providers, with their various agendas and diverse geographies," he wrote.

Mr. Wu said Apple "remains comfortable" with its current iPod inventory levels when measured by weeks, but that he remains "concerned with higher absolute levels of inventory due to the much greater number of store fronts (25,000 vs. 17,000 from a year ago) where one can purchase an iPod." Additionally, Mr. Wu said he has some concern about "excess inventory" Apple will be stuck with after Hewlett Packard ends its selling of the iPod line under its name.

Mr. Wu also said that Apple "could use the upcoming keynote by Steve Jobs at the Apple Expo 2005 event in Paris (September 20-24) to make a significant announcement beyond just new iPods. We believe this could be new markets including music subscriptions and video and the ever-elusive (Motorola-made) iTunes cell phone."

He made no change in his recommendation of Apple stock, saying "our fundamental view on (Apple) remains (as) iHoldi" with a target price of US$42.

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