Lagging iPod Shuffle Sales Partly to Blame for Postponed New Model Introduction

     If you’re a regular reader of this blog, you’re already aware of the particularly sluggish Shuffle sales this past holiday season. In an article I posted on Nov. 6, 2007, I alerted my readers to the disturbing downward trend in the sales of the Shuffle model as reported by Amazon’s regularly updated Best Sellers list. Since Apple does not provide sales guidance on its iPod line of players, nor does it break down quarterly iPod sales model by model, Amazon, as a leading online vendor, provides the best indicator of how well Apple products are faring each quarter.

     In another piece I posted on Nov. 21, 2007, I wrote that my insider has confirmed that Shuffle replacement are on the way. I was expecting that the new replacement model would be introduced at Macworld ‘08 in early January, just in time for seasonally slower first calendar quarter of the new year. There was good reason to believe the new model would be announced in January. While most iPods have demonstrated a 24 month product life cycle with minor updates arriving on alternating years, the Shuffle has shown an 18 month life cycle. The current generation Shuffle, originally introduced in Sept. 2006 and updated with color refreshes in January 2007 and again in Sept. 2007, is currently beyond its 18 month product lifetime and due to be replaced with a totally new model. Instead, almost a month later in early February, 1GB Shuffles got a whopping 38% price drop and a higher capacity 2GB model was added. What happened to the new model announcement?

     In a surprising admission addressing the Goldman Sachs Investment Forum, Apple chief operating officer Tim Cook conceded that sales for the Shuffle model had lagged by 17 percent worldwide during the past holiday season. For a product lineup that usually sees double digit yearly growth, that is a significant drop in quarterly numbers. Faced with sluggish sales and an overabundant inventory of stale 1GB models, Apple had to quickly clear existing inventory by drastically slashing price and to introduce a 2GB model to recuperate some profit on thinner 1GB margins. I expect that the 1GB model will be discontinued after it sells out and Shuffle replacements in 2 and 4GB capacities will be unveiled in the third calendar quarter. I’ll have more on the upcoming Fall ‘08 iPod lineup a little later.

D.S.