From the iPod Mini to the iPod Shuffle, Apple Computer’s popular digital music players have been the high-tech firm’s Holy Grail. But today that iPod grail looks only half full.
Concerns that Apple may be sitting on hefty iPod inventories dragged the company’s share price down 4.5 percent in Friday’s trading session — a bruising to which most Apple investors are not accustomed.
Investment firm Goldman Sachs said in a report Thursday that it expects shipments of Apple's digital music player to be flat this quarter, while Internet news site AppleInsider also reported Thursday that Apple has a glut of most iPod models, especially the recently launched iPod Shuffle.
Still, some analysts think the sell-off in Apple’s stock may actually be an opportunity.
“Four to five weeks is what we’d consider a normal supply, and that would enable those consumers looking for an iPod to find one,” said Steve Lidberg, an analyst at Pacific Crest Securities. “So we think this is actually good for Apple’s business.”
Some investors are worried that inventory problems in the typically slow summertime sales period may hit the company’s quarterly numbers, but Piper Jaffray analyst Gene Munster thinks the inventory issue may be overblown.
“This is a big deal for investors today, this week and for the June quarter,” he said. “But ultimately these inventory issues will likely go away, and specifically the September quarter, the back to school quarter, should be a home run, and the December holiday quarter.”
Another problem lurking beneath the success of the iPod is a class-action lawsuit over battery performance. It has dogged Apple for four years, even as it tried to put the issue to rest.
It has even touched CNBC’s editorial staff. Earlier this year, when interviewing Apple’s CEO Steve Jobs at the MacWorld Conference in San Francisco, CNBC’s Maria Bartiromo quizzed about her own iPod music player, which was on the blink.
“My iPod stopped working, and I wasn’t sure if it was my battery, or if it was just a one-time thing,” she told Jobs. His response: “We had some issues with batteries about a year and a half, or two years ago … I think that issue was resolved, but if you’re having problems let me know.”
Apple’s marketing executive Phil Schiller echoed Jobs’ comments one month later: “It’s old news, and really doesn’t affect what we're doing today,” he told CNBC.
But on Friday word came that a settlement on battery life with customers could cost the company $100 million, as it has agreed to give $50 vouchers and extend warranties to iPod consumers who have had problems with their batteries.
But that’s not so bad for a company with more than $7 billion in cash at hand, and considering that these sorts of company redemptions are usually only claimed by at best 30 percent of those that receive them. Some also note that, as the $50 vouchers are likely to be used as part of a bigger Apple purchase, they could be a revenue generator for the company.
