SigmaTel retains grasp on iPod shuffle business?
In what should come as a relief to its investors, SigmaTel Inc. is likely to maintain its position as a supplier of audio chips for Apple Computer's iPod shuffle digital music players, analyst for Wedbush Morgan Securities said this week.
"It is not surprising that Apple would âpunishâ Samsung for commenting publicly about its position within the iPod nano follow-on, and we believe that SigmaTel is likely to be the resulting beneficiary of the Samsung executiveâs gaffe," the analyst told clients. "We believe the shuffle business will contribute between $0.50 and $0.75 of earnings per share to SigmaTel in 2006, somewhat dampening the firmâs total operating losses."
Berger said his model for SigmaTel already includes shipments of 7.4 million iPod shuffle-bound chips for 2006. "There could potentially be some upside to these units if Apple continues to lower its Shuffle price as NAND flash costs continue to decline," he said. According to the analyst, each million iPod shuffle units the company ships will drive an additional $0.06 of earnings-per-share.
However, Berger said there is "no way" higher iPod shuffle unit shipments can single handily rectify the firmâs dire financial straits.
"In addition to seasonally soft MP3 player shipments in [the first half of 2006], we believe SigmaTel is being 'sandwiched' between Samsung/PortalPlayer at the high end of the MP3 chip market (with Apple) and Actions Semi at the low end, losing significant market share to the latter over the past year," the analyst wrote.
Shares of SigmaTel have been met with a steady decline since last summer as competition in the digital media player space has heightened. Shares now trade in the $5 range after falling from a 52-week high of over $24 last June.
Wedbush Morgan Securities maintains a "Sell" rating on the company's shares, with a price target of $5.
16 Comments
As i'm typing this apple's shares are $59.92 \
What the fuzz
Will the iPod shuffles ever be updated?
Will the iPod shuffles ever be updated?
Wait it's cloudy. No messages yet! Wait......wait.......wait......i'm getting something? I can see letters I think, yes they're letters alright. 'Y'......'E'.......'S', yes, yes! The Gods have spoken, and the answer is yes.
As i'm typing this apple's shares are $59.92 \
What the fuzz
Apple's shares have nothing to do with this article. It's talking primarily about SigmaTel, not Apple.
Curious thing about the shuffle is what can Apple do with it (to "update" it) without making it (really) a completely different product.
The shuffle began life as a low-cost entry into the "World of iPod(tm)". As I recall, they started at $99 and $149. Now we have a nano at the $149 price point (amazing).
Here are some issues:
- if they increase shuffle capacity the "shuffle" and display-less character of the shuffle becomes an annoyance
- if they add a display they increase costs, and (possibly) size...if not size, they have to deal with some alternative form of display/UI than the current iPods
I sort of suspect that shuffle was designed for a couple of reasons:
1. An answer for the extreme price-sensitive market, and to ensure Apple wasn't going to lose (all of) them to competitors.
2. A "stop-gap" until they could get a "real" iPod down to that price-point. iPod nano 1GB is already there (or getting there).
3. It is actually kind of a clever small, durable, light, inexpensive music playing device for a lot of people as an "accent" ot a larger iPod. Someone wants to go out riding, running, walking, hiking, whatever...just load up a few hundred songs and click shuffle.