Despite optimism in many quarters, some investors still fear the iPod bubble may already have burst.

Citing anecdotal evidence suggesting iPod sales have slowed down, the Financial Times reports. Investors are looking to Apple’s financial results news tonight to suggest its music player sales remain buoyant.

“There seemed to be a slowdown in this quarter. There is more product available in the channel,” iSuppli consumer electronics analyst Shyam Nagran told the Financial Times. “Either Apple upped production a lot or sales are slower.”

When enough isn’t enough

Inadvertently revealing the depth of expectation investors have, the report pints out: “Most analysts estimate Apple will have sold 5.4million-5.5million units. That would be a huge increase from 860,000 units sold in the same period last year but only a slight gain on the 5.3million units sold in the second quarter.”

However, analysts at Piper Jaffray and SG Cowen have already predicted the success of the music player to have driven growth in Mac sales - maybe even to the extent of driving up Apple’s market share.

Meanwhile, analysts and investors are beginning to consider what Apple will do to maintain and to build momentum for its iPod products, proposing new features for it, such as wireless Internet access or satellite radio support.

Developing the product as a digital media centre appears a less attractive prospect to the company - unless it finds a way to revolutionise delivery of copyrighted video content to portable devices, as it did with the launch of its iTunes Music Store.

Parks Associates predicts just 13 million portable media centre devices will have shipped by 2010, which suggests minimal benefit for Apple from taking iots iPod in that direction - unless the company can innovate within that sector.

Controlling expectations

Business Week covers the same ground this morning, suggesting iPod sales may soon slow and asking what Apple plans to do to maintain growth.

This report points out that if Apple meets its revenue target, the achievement represents a 60 per cent increase in its year-on-year revenues - but this is due to a huge growth surge in the music player market, which analysts reckon is now flattening out, the report claims.

Despite this, Apple is expected to have sold 35 million iPods by the end of this year the majority of which will ship in 2005.

Shaking-up the DNA

Whatever Apple reveals during its results announcement tonight, Wall Street has begun to apply its pressure to encourage the company to stoke up the innovation within its DNA.

“With every passing quarter, the company that set the music world on fire with the iPod is in greater need of an encore,” the report explains.

A new innovation consumers will flock too is required to maintain sustained growth.