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Strategies & Market Trends : Ask Vendit Off-Topic Questions -- Ignore unavailable to you. Want to Upgrade?

To: Vendit™ who wrote (2725)	12/19/2004 10:09:24 AM
From: Walkingshadow	Respond to of 8752

Yes Reid, I agree. That iPod download revenue is beginning to become a significant part of their overall revenue... I believe they are expecting revenues of a bit over $3 billion for the quarter, but probably close to $75 million of that was generated from downloads. The more iPods they sell, the more the download rate (now approaching 1 million per week, at $0.99/download) will increase. That increase is not linear, but curvilinear, almost exponential. They began selling downloads in April 2003. As I recall, they reached the 50 million download milestone about a year ago, but that doubled to 100 million 8 months later, and it took only another 5 months to double from there to reach 200 million. At this rate, they'll reach 1 billion downloads in roughly another year. That's $1 billion in revenue in less than 3 years, with revenue increasing pretty nicely, and the overhead to get this revenue is pretty cheap---it's not like they have to build new stores, or advance the technology, or anything. Just maintenance. I mean, if you own an iPod, or got one for xmas, you've basically gotta download stuff. And since music is constantly changing, you'll have to download things more or less constantly at some rate. Some may argue that AAPL is getting pricey, but I don't think so when you consider them in relative terms to their sector and the market, and the fact that their revenues are growing at considerably greater than a linear rate. Their market cap is about $25 billion, they've got over $4 billion in the bank, zero debt, and annual profits of about $2.3 billion on revenues of $8 billion. It's probably not a fair comparison, but the market cap for SIRI is a bit less than half that of AAPL, but SIRI's revenue is less than 1% that of AAPL ($50 million vs. $8 billion); AAPL has been profitable for over 6 years and the Street expects them to report $0.46/share profits on Jan. 12, but SIRI is not profitable and is expected to report a loss of $0.14/share in January. So anyhow, things look very good with that revenue stream, and AAPL customers are very loyal, because it is cool to own AAPL stuff. But again, I think this is only the beginning. I think the iPod was really just a sort of tool to transform the company. Partly, this effort was marketing/image related, partly it was to allow diversification with a conservative source of stable revenues, but mostly it was to allow them do make serious inroads into the PC markets. I'd say they have been dramatically successful at the first two, but it is the third one that will really make them an 800 lb gorilla some day. This is, arguably, the best part of the growth curve of any 800 lb gorilla, because the uncertainties associated with their emergence onto the market place are gone, but their growth is still curvilinear, or perhaps approaching exponential. Personally, I like that risk profile a lot. T