Wedbush Morgan Securities analysts Craig Berger and James Schneider on Tuesday issued a research report looking at PortalPlayer, pointing to second quarter revenue guidance that they believe implies a 15-20% drop in iPod shipments from the first quarter. PortalPlayer previously provided system-on-a-chip (SOC) processors for the iPod nano but said on April 20 it had lost the contract for upcoming models of the flash-based MP3 player.
While the company still provides Apple with SOC processors for the standard iPod and has other lines of business, the Wedbush analysts characterized PortalPlayeris loss of the iPod nano socket as "one of the uber-bear case scenarios that investors have feared." They added: "[This] has a disastrous impact on PortalPlayeris profitability in light of the fact that iPod nano chip shipments once comprised 70% of our 2007 revenue."
The analysts also pulled expected standard iPod sales from PortalPlayeris revenue forecast "in light of Appleis apparent ability to switch chip suppliers at will." They are among the industry watchers who expect Apple to release a redesigned video iPod sometime this year, and they had previously said they expect Apple to use PortalPlayeris solution in such a device. They still believe that to be the case, but only because competitor Broadcom does not have an SOC processor thatis better than PortalPlayeris offering.