Apple Introduces Totally New Nano

     Apple has just introduced a newly redesigned Nano in nine colors.

     New nano has an accelerometer to change display orientation and features a tapered look to match current Apple design theme. Songs can also be shuffled by shaking the player. The 8GB model goes for $149, $199 for the 16GB model ( silver, indigo, blue, lime, green, yellow, orange, red, magenta ).

     iPod Classic is upgraded to 120GB and 160GB model is discontinued. The Touch model now features an integrated Nike + iPod receiver. Touch is available in 8GB for $229, 16GB for $299, and 32GB for $399.

D.S.

Expectations for the Apple “Let’s Rock” Event

     Apple has announced that it’ll hold a special event on Sep. 9th called ‘Let’s Rock’, possibly hinting to the introduction of new iPods. I’m hoping that the entire iPod line receives major software and hardware upgrades with special attention paid to the entry level models. Nano has been the best selling iPod during the past 12 months and Shuffle sales have peaked after the recent aggressive price reductions and memory upgrades. It’s clear that as higher capacity iPods have reached market saturation in terms of US consumer ownership, the entry level models have the most ground to gain. Here’s what I hope will get introduced on Tuesday and not necessary my predictions:

- 160GB HDD-based iPod Touch – it’ll take a long time for 160GB of flash memory to get cheap enough for use in an iPod, so Apple could introduce a hard drive model to encourage all of those who want to carry a full music collection to upgrade. By encouraging Touch adoption, Apple also promotes the new App Store as a complimentary model to iTunes for steady revenue growth in the process.

- 120 GB Classic – new Microsoft Zunes will allegedly get a capacity upgrade from 80 to 120GB and it only makes sense if Apple follows suit. I’d also like to see a higher resolution 3 inch screen plus over-the-air iTunes purchase and general firmware refinements to device navigation.

-  16GB nano at $200 – nano will ultimately take over the role of the bigger Classic in terms of both maximum memory capacity and functionality and this would be a step in the right direction. Over-the-air iTunes purchase should be added too.

- Shuffles should not be discontinued as they do serve some users rather well ( I’ve been reminded of this many times in reader emails ) but I also believe Apple must release a 2GB iPod with screen for about $70, something that’s currently missing in the lineup.

D.S.

End of Life for HDD based iPods?

     In the remaining few days leading up to the annual iPod refresh, quite a few analysts have weighed in on whether Apple will switch to all flash memory for its iPods or keep hard disks around a bit longer. The popular belief is with solid state memory getting cheaper, flash capacities on par with current 80 or 160GB hard drives are foreseeable in the near future. But the truth of the matter is flash memory isn’t getting cheaper fast enough: faced with significantly lower customer order projections for 2008 and at least through the first three quarter of 2009, solid state memory manufacturers are scaling back production in order to firm up bulk pricing on existing  batches.

     As a result, even with a weaker demand, pricing for higher capacity memory batches have fallen less than earlier expectations and the portable media player segment with more than 16GB of onboard memory has suffered from stunted growth. Apple can certainly negotiate better unit pricing for its iPod memory buys than your average low volume device manufacturer but it will take an improving global economy to encourage chip producers to implement the essential newer manufacturing technologies to achieve higher batch densities resulting in substantially lower prices.

     What do the prospects of long term pricing stability in the flash memory market mean for Apple? I believe there exits a gap of at least 2 to possibly 3 years before which flash based iPods in excess of 100GB capacities can be deemed affordable for the US consumer. Apple is aware of this problem and introducing a HDD based Touch could be a potential solution. Such a model can effectively serve as a stop gap measure until bulk pricing prospects for higher density solid state memory batches can significantly improve. A HDD based Touch could be introduced quickly given that the device requires fairly minor changes from its current design and can be released to manufacturer in short order. The other HDD based possibility, which I’ve already covered on earlier posts, is the continuation of the 160GB Classic model with improvements to the software and hardware. We’ll see how Apple maneuvers in the weeks ahead but based on current economic conditions, the sun certainly hasn’t set on the idea of HDD based media players just yet.

D.S.

‘Product Transition’ Comes Up Again

     In the last Apple Investor Conference Call held on July 21st, Apple CFO Peter Oppenheimer once again talked about a certain ‘product transition’ which has an effect on Apple earnings well into ‘09. This isn’t the first time ‘product transition’ is mentioned by Oppenheimer: he used it in the same quarterly Investor Conference Call last year to describe an undefined period during which Apple’s profit margin may be under pressure. If you’ve been reading this blog regularly, you may remember that at the time, I interpreted this as a sign that Apple is getting ready to replace the iPods with touch screen versions as well as preparing other revolutionary products like a touch tablet. Since then, Apple has introduced the Macbook Air, which is selling briskly, and higher capacity iPod Touch models like the pricey 32GB version.

     So what does ‘product transition’ mean in terms of new product surprises? You’ve read about iPod’s future on previous posts but after some interesting conversations over the summer with people in the know, I’ve learned that apparently Apple’s in the midst of introducing major changes to its notebook and desktop lineups as well which I will explain a little later.

D.S.

Revealed: Next Gen Mid Sized iPod Details

Apple’s plan for a new type of media device has been uncovered by my iPod source. The new mid sized media player is certain to be a next generation Nano or Nano replacement, although it’s still early for the device to be designated a marketing name by Apple and my source is reluctant to call it a Nano. What lends enormous credibility to this plan is how well it coordinates with Apple’s desire to introduce an entry level iPhone and the time frame involved.

My iPod source had previously revealed that the physical interface in Apple’s mid sized media player would slowly be phased out in favor of a touch screen and that we could potentially see Apple market an upgraded Nano as well as a touch-screened version side by side; much like the strategy the company adopted in introducing iPod Touch and iPod Classic together in Fall 2007. The time frame mentioned for this scenario was between Fall 2008 and Macworld 2009. What was unclear at the time was how Apple planned to implement a multi-touch screen on a Nano-sized device and what sort of functionalities would be sacrificed due to a limited working space. The picture that is now beginning to emerge is a new take on the idea of touch interface which would address concerns unique to a small device.

My source describes plans for a device which is about the size of a first or second generation Nano but missing the click wheel. The entire face of the device is covered by 2 screens and navigation is said to be carried out using the lower 1/3 of the device. The plans call for a separate lower touch screen to display menu icons and positions based on currently selected functionality so music, photos, movies, and game navigation would each get their own unique menus and the user would select icons by simply touching them. This scheme is not entirely unlike the idea behind navigation on newer handsets such as the Samsung Soul or the Motorola ROKR E8, although those devices have touch pads. The advantages for Apple in using a partly touch sensitive screen instead of a larger touch-screen are twofold: Apple saves on the cost of hardware for implementing a smaller touch-screen with limited functionalities suited for a small device, and Apple retains distinct product differentiation across the Nano and Touch lines. Effectively, capabilities such as multi-touch and WiFi will continue to remain unique to the iPod Touch while a future Nano can still claim to feature touch navigation.

Another interesting tidbit here is the strong likelihood that Apple will use the same future Nano platform to build and release an entry level iPhone. My iPhone source had revealed some time ago that Apple has planned a three-tier iPhone product scheme and that multi-touch functionality on current iPhones will not be offered on a lower level product. Details of the new Nano seem to provide the missing piece of the puzzle: the iPod Touch and the iPhone share a common platform and so will a future Nano and entry level iPhone. Stay tuned as it should be an exciting September ahead.

D.S.

Apple Reports Best Second Quarter Yet

     Apple reported record fiscal 2Q 2008 financial results ending March 29, 2008. While profits rose across all company divisions, margins were less than previously expected. Apple reported a gross profit of of $7.51 billion and a net profit of $1.05 billion. Last year for the second fiscal quarter, Apple made a gross profit of $5.26 billion and a net profit of $770 million, however gross margin was 32.9 percent this year down from 35.1 percent last year.

     Apple sold 10,644,000 iPods, 1,703,000 iPhones, and 2,289,000 Macs during the second quarter. Revenue growth for the Mac division was exceptional with 54 percent compared to the same quarter last year. Apple reported an overall revenue growth of 43 percent with over $17 billion in revenue and $4 billion in cash flow for the first fiscal half of the year. Apple’s CEO Steve Jobs added in a press release: “we have strong momentum to launch some terrific new products in the coming quarters”. Apple stock closed at $162.89, up $2.69 for the day.

D.S.

Next Gen iPods to Feature WiFi-Free iTunes Access?

     According to a tip I’ve received from a trusted source, Apple is laying the groundwork to introduce connected wireless access to iTunes Music Store across continental United States. Similar in nature to the service offered by Amazon’s Kindle book reader, iTMS access would be offered utilizing AT&T’s traditional data networks in order to provide a WiFi-free way to search, sample, and purchase available content. Apple will offer fast and high speed delivery of iTunes content and will pick up the wireless connectivity costs as well. The new service may also be interpreted as the precursor to offering a subscription based iTunes content model.

D.S.

BusinessWeek: Subscription iTunes Makes Sense but Unlikely

     In recent days, Financial Times reported that Apple is in talks with major recording labels over bringing subscription music service to iTunes. The deal supposedly would allow unlimited access to the iTunes music library in exchange for an undisclosed mark-up on iPod prices. Arik Hesseldahl of BusinessWeek reports that while such a deal in these times of slower sales growth for iPods makes sense, his sources familiar with Apple’s plans have refuted the claims made by FT. He goes on to say that while recording labels do see potential benefits to unlimited downloads for a flat monthly fee, Apple’s chief is harder to convince.

Read more from BusinessWeek here

D.S.

Piper Increases iPod Estimate, Macs Grab 14% Market Share

      The latest NPD Group data was just released highlighting positive trends for Apple products. Gene Munster of Piper Jaffray has done an analysis and says the data “suggest the company will sell 9.7 million to 10.5 million iPods in the March quarter”. While that figure is higher than his estimate of 9.5 million to 10.3 million units released a month ago, “the new range is below the Street consensus of 10.8 million, and his own current estimate of 11.3 million”. So the new expected unit sales numbers are above his previous prediction and below his current one. Sounds like he can’t decide whether to believe iPods will surprise or disappoint this quarter.

     In the same NPD Group release, Macs accounted for a 14 percent unit share of all US computer retail sales in February. That number represents 60 percent unit growth and 67 percent revenue growth over the same period last year. Both Apple notebooks and desktop systems grew in overall retail segment shipments while US PC retail shipments grew modestly in comparison.

D.S.

Sources Reveal Insight into Future iPod Lineup

      Apple CFO Peter Oppenheimer offered a rare glimpse into Cupertino’s product development roadmap during his company’s Q3 conference call in mid 2007 by referring to an ongoing “product transition”. Evidence is mounting that the iPod roadmap is what he specifically had in mind. According to my sources close to the iPod product division, Apple may reveal no less than 5 models this Fall in an effort to facilitate the iPod transition to the touch platform, only to consolidate iPods into the traditional 3-tier lineup a year later. It seems that the problems Apple is facing centers around the saturating iPod market penetration in the US and lower consumer confidence due to the looming prospects of a major economic slowdown. Apple is concerned that the sharper than expected fall in the sales of digital media players during the fourth calendar quarter of 2007 could spell the same for its iPods resulting in significantly lower revenues from the profitable unit. Apple is expected to counter these problems by introducing new lower end models based on the touch platform, hence enticing new buyers and necessitating an upgrade for the existing iPod user base. What follows is a description of iPod’s future based on tips provided by my sources reflecting the roadmap as of late January ‘08.

     My sources tell me that the 1GB Shuffle will be discontinued once the current inventory runs out. A razor thin profit margin due to the recent price cut is apparently the culprit. The 2GB version will appear in the Fall ‘08 lineup but no major redesign is expected. A new 2 and 4GB iPod model featuring a screen and a smaller profile than current nanos will be introduced. Nanos will sport the same design plus the usual yearly feature improvements and a new 16GB model is expected, alongside the existing 8GB unit. The exciting news for the nano, however, is a new generation of Click-Wheel Apple is working on which offers improved usability comparable to the jump from third to fourth generation models. The nano is expected to be discontinued in 2009 paving the way for a similarly sized touch based model, although both nano and its replacement may be offered side by side in order to gain traction for the newer model ( similar to Classic and Touch last year ). The 80GB Classic will be discontinued and the 160GB model will get the ax in ‘09. A Touch 64GB model will appear this Fall along with the existing 32GB version. I was also told the sharply lower demand for flash chips so far this year and the consequential drop in their lot prices will mean more iPod price cuts are on the way and it may facilitate Apple’s plan to introduce higher capacity flash models earlier than expected. Stay tuned as I’ll have more details on specific models a little later.

D.S.