US Money Magazine believes Apple is ailing, despite the fervour surrounding its iPod music player.
The title accuses Apple of reduced CPU sales; falling market share; decreased profit margins; and other claimed failures in Apple's strategy for growth. A paid subscription is required to access this report.
Assessing the present, Money says: "The iPod is more than the most successful digital music player ever: It's a cultural phenomenon – on a par with Sony's Walkman – radically altering the way we buy and store music. This apparent success has lured many investors to jump on the Apple bandwagon… but behind the hype and buzz surrounding the iPod and Jobs, there are problems stewing at Apple."
Sample comparisons (courtesy of MacNN) include: "Apple sold just over three million computers in its last fiscal year, which ended in September – 900,000 less than it sold in fiscal 1996, the year before Jobs returned… Meanwhile, Apple's share of the worldwide personal-computer market has shrunk to 2 per cent from 3.2 per cent five years ago."
The report states that if Apple's retail outlets were forced to operate on the same margins as the company offers its resellers, its stores would have lost "as much as" $80 million in 2003. However, the report cites reseller Tom Santos to arrive at this figure.
Santos is one of the resellers currently pursuing a claim against Apple, citing that the company favours its stores against its reseller channels. This case has not yet reached trial, when the veracity of such claims will be decided by the courts.
The report examines Appe's cash in hand, and points out that the company made more from interest on this than it did in operations last year. It adds: "The company's stock, at a recent $23, trades at 20 times estimated 2004 earnings. Dell's shares, on the other hand, go for 26 times projected 2004 earnings – but its business is three times as profitable as Apple's."
Looking at Apple's strategy to attract Mac buyers through iPod sales, the report adds: "Out of the hundreds of people who were waiting outside Apple's SoHo store in the cold to buy an iPod, I could find only one whose positive experience with the music player led him to buy an Apple computer."
Those queuing to buy an iPod would not yet have had the chance to experience the product sufficiently for any Mac-buying decision to be made, however.