Report: iPod shipments tracking towards first yearly decline

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Shipments of Apple's iPod digital music players could see their first yearly decline come the end of the company's March quarter, investment bank Piper Jaffray said Monday.

In a research note to clients, analyst Gene Munster said he's analyzed the first month (January) of NPD market research data for the three-month period ending March and found it to suggest total iPod unit shipments of between 9.5 million and 10.3 million units for the quarter.

Should Apple manage to hit the midpoint of that 9.5 to 10.3 million estimate, shipments would have still declined by approximately 6 percent from the same period last year when the company shipped 10.54 million units — marking the first time iPod shipments have fallen on a yearly basis since Apple began providing sales figures for the digital media player line back in the fourth quarter of 2003.

Munster's findings also come in shy of Wall Street's current consensus estimates, which have the Cupertino-based electronics maker shipping approximately 10.8 million iPods during the quarter, representing 2 percent yearly growth.

Still, Munster viewed his findings as "a slight positive" given all the recent Street chatter of extremely weak iPod numbers for the quarter and the potential for the recently announced iPod shuffle price cut to fuel higher than expected shipments during the months of February and March.

"The 9.5 million -10.3 million unit approximation is based on various assumptions and is an extrapolation of one month of data," he explained. "When the second month of data is released, our analysis will likely lead to a slightly different iPod unit figure than what our analysis suggests based on the first month of data, so we believe investors should supplement this data point with other information."

Declining growth of the standalone MP3 player market, as well as Apple's overall iPod business, has been a cause of concern for investors following the company's December quarter results, which had sales of the players come in relatively flat in the US for the first time in recent history.

While some have feared the declines are indicative of an iPod business that has reached its saturation point, Apple executives have discounted that notion, noting that iPod revenues grew 17 percent year-over-year during the December quarter, a figure they maintain is "uncharacteristic of a saturated market."

Moving forward, the company said it hopes to evolve the iPod beyond an advanced music player and into the first "mainstream Wi-Fi mobile platform" capable of running "all kinds of mobile applications." This strategy would indicate a focus on selling quality and functionality at a higher price, rather than quantity and less functionality at the absolute lowest price. As such, Apple has suggested that the best way to measure the overall growth and performance of the segment is no longer by unit metrics, but rather by revenues.