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iPod Sales help Apple Soar
October 19, 2006
Thomas Mennecke
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What started as a small project in a car garage has transformed into one of the most successful computer technology firms worldwide. Apple’s recently published earnings for the 4th quarter of fiscal year 2006 is a testimony to that fact, as the company generated net revenue of $4.8 billion, and a profit of $563 million.

And those totals only account for the last three month months of fiscal year 2006. Although these numbers paint a rosy picture for Apple Computers, the situation was not always so fruitful. The initial golden age for Apple, which composed of a decade during the 80s and very early 90s, failed to carry the company into the latter part of the last century. Teetering on the verge of disaster, Apple’s fortunes would be salvaged by an unlikely source.

That unlikely source would be the digital music revolution, fueled into mainstream popularity by Napster in 1999. No one at that time could have predicted this seemingly insignificant event could have resurrected an otherwise floundering computer manufacturer. Indeed, at that time Apple Computer’s primary product at that time – and for all reasonable intentions, the only product - was the Macintosh (Mac.)

Today Apple is a premier technology firm. But don’t thank the Mac, at least not entirely. According to Apple’s financial report from last quarter, the company sold over 8.7 million iPods in the last quarter. Mac sales were also impressive, with a record 1.6 million units sold. Total revenue generated by the iPod equaled $1.6 billion, while the Macs made up the difference with over $2.2 billion in sales. What about the left over billion?

iTunes continued to played a small role in Apple’s revenue with about $452 million in sales. This represents a substantial increase of 70% from the same quarter in 2005, but is actually a drop of 1% from the 3rd quarter of this year.

It’s clear from Apple’s financial report that the iTunes music store is no where near the money maker that the iPod or Mac represent. Although $452 million is hardly a number to dismiss, iPod’s dominance in the market is powered by factors other than iTunes. iTune’s relatively minor financial role in Apple’s resurgence gives credence to a recent report (and empirical evidence) that indicate that iPod owners have a less than enthusiastic opinion of the online music store.

From the BBC, “The Jupiter Research report says that, on average, only 20 of the tracks on an iPod will be from the iTunes shop.”

Instead, P2P networks, CD ripping, play list trading, and avenues other than the online music store have helped the iPod become the de facto MP3 player standard it is today. Where would Apple be today without the iPod and the digital music revolution? About 1.6 billion in the hole and probably out of business.

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Authorized Music Store :: iTunes

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