Apple to sing iPod tunes with U2
marketwatch.com
By Rex Crum, CBS.MarketWatch.com
Last Update: 1:42 PM ET Oct. 25, 2004
SAN FRANCISCO (CBS.MW) -- The iPod media player has become so critical to the health of Apple Computer that it seems only a matter of time before the company drops the "Computer" from its name.
When it posted its fourth-quarter results on Oct. 13, Apple (AAPL: news, chart, profile) said it sold 2 million iPods during the period. Several analysts estimate that the company could sell close to 3 million iPods this Christmas season.
What's more, iPods accounted for $537 million in revenue, or 23 percent of the company's $2.35 billion in sales, during Apple's fiscal fourth quarter. While iPod revenue grew 344 percent over the same period a year ago, sales of Apple's flagship iMac computer line fell 23 percent, to $216 million.
With the holiday shopping season about to kick into gear, Apple has fueled speculation about how it intends to maintain enthusiasm for the iPod and use it to improve sales of its computers. Never one to shy from making a large splash with new products, Chief Executive Steve Jobs will take to a stage Tuesday in San Jose, Calif., with U2 singer Bono and guitarist the Edge to show off ... something.
Whatever it is, Apple, as usual, is being tight-lipped. But the inclusion of two members from one of the world's biggest rock bands -- a band featured in new iPod commercials -- has industry analysts saying it's not much of a stretch to believe the iPod is about to get some sort of face-lift.
"What's made the iPod a home run is the music," said Gene Munster of Piper Jaffray. He believes Apple will show off either a new, color-screen, 60-gigabyte iPod (the largest current iPod has a 40-gigabyte hard drive) or an iPod Mini that can hold more than the current model's 1,000 songs.
"It's their game to lose and they recognize that," Munster added.
But the game is changing. Apple is facing new competition from the likes of Sony (SNE: news, chart, profile) and its digital Walkman music players.
It is unlikely that Apple will come out with anything new for the holidays other than a limited-edition U2 iPod, with no upgraded hardware, according to Steven Milunovich of Merrill Lynch.
The analyst said Apple could be gearing up to release an iPod in early 2005 that can store and show photographs, as well as a flash-memory version of the iPod aimed at the low-cost end of the digital media market.
The release of Microsoft (MSFT: news, chart, profile) Windows-based Media Center computers, which can record and play back television, video and music, has spurred rumors that Apple needs to create a similar product or lose its iPod-based momentum.
The hoopla surrounding Apple's music event Tuesday could result in something such as an iPod preprogrammed with the entire U2 catalog, said Alan Promisel, research analyst with IDC.
But the company needs to begin looking beyond music. "The iPod gives them a great opportunity to penetrate the Windows world," added Promisel. "But the Media Center really ties everything together, and something like that's the hole in their line."
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