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Strategies & Market Trends : Gorilla and King Portfolio candidates - Moderated -- Ignore unavailable to you. Want to Upgrade?

To: Apollo who wrote (1466)	6/7/2005 1:52:30 PM
From: Eric L	Respond to of 2955

A formidable iPOD Challenger ... ... and probably one of the main one's -- if not THE main one -- that will be coming at the music player market hard and fast with both standalone and converged devices while Nokia and Motorola will approach the market primarily with converged devices. They plan to utilize all of their formidable resources accumulated from microchip technology, design, and global sales networks and distribution to become number one in the market in three years, and couple that with a low price but high quality strategy, backed by very strong brand. These guys are scary. When they focus on a consumer electronics market they really attack it. >> Samsung Electronics Can Make Mistakes Too June 07, 2005 Do-Young Kim Donga tinyurl.com Market Predictions Off Target Vice Chairman Yun Jong-yong says ‘speed management’ is the key factor that made Samsung Electronics a global company. In the IT industry, the changes in technology are rapid, so the most important thing is bold, quick decision-making. Samsung’s semiconductors, LCDs, mobile phones were all able to succeed on the basis of this. The MP3 player, however, is one product that Samsung Electronics did not engage in 'speed management' with, which marked a dent in Samsung’s successes. Samsung Electronics was the MP3 market leader until 2002, but was then pushed to the periphery of the market. This was because they did not foresee the significance of the MP3 player market and how big this market would grow. In 2003, the U.S. company Apple bought copyrights and enabled consumers to download music at a low price. The introduction of such "Solomon’s Wisdom" changed the market situation completely. At the time, Samsung Electronics, along with other global companies, considered Apple’s chances of success to be very slim, and the popularity Apple enjoyed to be a temporary phenomenon. However, Apple sold over 10 million MP3 players in three years and took over the world market. Vice President Yun reproached his employees, saying, "We must think about why we were beaten even though we were the ones who made the first MP3 player available in the world." A Late New Beginning MP3 players have a unique meaning. First of all, these players are used by people in their early teens, so it opens up opportunities to attract future potential customers. Sony’s most faithful customers are those in their 30s and 40s. They were the ones that were mesmerized with the Walkman in their teens. Also, MP3 players are carried around everyday so their brand name is naturally advertised. This is in line with the fact that Samsung’s mobile phone 'Anycall' exposure was the number one reason behind Samsung’s international reputation. Samsung acknowledged these facts and, although late, is now concentrating on MP3 players. Samsung Electronics has brought in an affiliate company Bluetek’s audio R&D and marketing personnel, and is strengthening its efforts in this area. Aftereffects of Lower Price Policy Samsung Electronics, as the late runner, is utilizing all of its resources accumulated from microchip technology, design, and global sales networks to become number one in the market in three years. However, in actuality, Samsung’s strategy is one of lower prices. This strategy is not like China’s of low-priced low quality products, but lowering the prices of high quality products. The problem is that this strategy will hurt not Apple, but Korean small- and medium-sized companies such as Reigncom, Cowon Systems, and MPIO. One source of the small-and medium-companies said, "Foreign buyers are saying that our products cannot be more expensive than Samsung Electronics products, since Samsung has a high brand value, and are requesting lower prices, so our margins are continuously dropping." Samsung Electronics explained, "The lower price strategy was started by Apple, and we were merely responding to it." << Apollo, Eric, Thanx for the posts. Nice to breathe some life into the Thread. It is. I'll try to help get this on a G&K analysis track shortly, but thanks for taking the lead on this. Music players are already a big marklet and the market is bound to get bigger fast. Best, - Eric -

To: Apollo who wrote (1466)	6/7/2005 6:43:36 PM
From: Mike Buckley	Read Replies (1) \| Respond to of 2955

Apollo, (I think it safe to assume Merlin does not have an iPod). A very safe and accurate assumption. However, you might be surprised to learn that for quite awhile I have been using the following in my home: Tivo-like DVR WiFi Digital camera Slide and film scanner 3G cell phone (I'll be using it to check wine ratings in a restaurant next week when my wife and I celebrate our anniversary. Otherwise, it's a complete waste. :) I have been thinking a long time that the iPod might be playing a gorilla game. The question on my mind is switching costs. They seem to me to be really low, but maybe you or someone can explain why that's not the case. --Mike Buckley

To: Apollo who wrote (1466)	6/7/2005 9:16:02 PM
From: Eric L	Read Replies (1) \| Respond to of 2955

MP3 Players: Sizing the Market Apollo, I thought it might be wise to take a look at the size of the market we are discussing. I haven't explored it in depth but although market estimates vary this is the way iSuppli sees the market and I'm reasonably sure they are just looking at standalone devices. I say that because Nokia alone will ship some 40 million phones this year with MP3 players but the majority of those units will not be audiophile quality or more properly stated perhaps, most will not approach the audio quality of the iPOD. The MP3 Market (iSuppli) · Units $$$ HDD Units HDD % ============ ============ ============ ====== 2003 17.0 million $2.1 billion - 2004 36.8 million $4.6 billion 9.8 million 26.6% 2005E 57.7 million ? - 2009E 132.0 million $12.0 billion 56.2 million 42.6% iSuppli notes: • The MP3 player market mushroomed suddenly in 2004, with shipments rising 116 percent as hundreds of products arrived in response to the overwhelming success of Apple Computer Inc.'s iPod. • While growth will slow in 2005, MP3 player shipments are slated to rise 57 percent from 36.8 million to 57.7 million, said iSuppli. • Total MP3 player shipments will expand to 132 million units in 2009, rising at a compound annual growth rate (CAGR) of 29.1 percent from 36.8 million in 2004. • HDD-based MP3 player shipments will grow at a CAGR of 41.8 percent from 2004 to 2009. Shipments will rise to 56.2 million units in 2009, up from 9.8 million in 2004. • By 2009, iSuppli expects HDD-based products to account for nearly half of all MP3 shipments at 42.6 percent, up from 26.6 percent in 2004. Market research firm Gartner estimates that worldwide MP3 player sales, which nearly tripled last year, from 14 million to 40 million units, should almost double again during 2005, to 75 million units (see chart, "MP3 Player Forecast," at link below). Many analysts expect Apple to sell 20 million of those units, up from 8.5 million in 2004. reed-electronics.com According to Dow Jones News, global shipments of MP3 players are expected to reach 35 million to 45 million units this year, and are forecast to rise to 55 million units in 2006 due to growth in demand for both flash memory and hard disk drive based products, a Samsung Electronics executive forecast recently. Apple's fiscal year is the same as QUALCOMM's (ending September 31), but I backtracked Apple's iPOD sales by quarter for calendar year 2004: • CQ1'04 (FQ2 2004) 807,000 iPod units shipped (909% increase from FQ2 2003) • CQ2'04 (FQ3 2004) 860,000 iPods units shipped, representing a (183% increase FQ3 2003), bringing the total sold to about 2.8 million since the first model was introduced in October, 2001. • CQ3'04 (FQ4 2004) Apple sold 2.016 million iPods, up 134% on FQ3's 860,000 total and 500% more than the year ago quarter. That takes the iPod grand total to just under 5.74m units • CQ4'04 (FQ1 2005) iPod sales rose to 4.58 million units, up 525% year-over-year, raking in a total of $1.2 billion in revenue and bringing cumulative shipments to 10.32 million, That totals 8.263 million iPOD units shipped in CY2004. Assuming that iSuppli's estimates are reasonable that makes Apple's market share of MP3 Players in CY2004 ~23% but much higher than that for units equipped with a hard drive and probably over 70%. • CQ1'05 (FQ2 2005) Apple shipped over 5,311,000 iPods accounting for just over $1B in revenue (accounting for 31% of Apple's total revenue). This represents a 558% increase in unit shipments from the year-ago quarter, and a 284% surge in revenue. It looks like there maybe an inventory glut at the moment so sales for CQ2 are estimated to be relatively flat. Just some odds and ends, but I was curious about what size market we are looking at, and what estimates for market growth were. A preliminary observation is that hypergrowth may be over, or nearly over, both for the market (excluding converged devices) and for the iPOD. Best, - Eric -