This is an
undated photo of Sony Corporations new portable music player, NWE505, provided
by Sony Corp. Hoping to regain some of its luster in a market dominated by the
iPod, Sony is coming out with a lineup of portable music players taking
particular aim at Apple Computer Inc.'s slim new iPod Shuffle. (AP Photo/Sony
Corp.)
Apple Computer
Inc. shares dropped Tuesday on concern a relaunch of Sony Corp.'s famed Walkman
line and increased competition from Napster Inc. might take a bite out of its
dominance of online music and portable players.
The Cupertino,
Calif.-based computer powerhouse has seen the success of the iPod music player
transform both its balance sheet and its stock price. Apple _ which has been
one of the best performers in the Nasdaq technology index over the past year _
even handed investors a stock dividend in the form of a two-for-one split as a
result of its shares almost quadrupling in value during the past 12 months.
But, it appears
Apple for the first time might become bruised by some serious competition from
both Sony and a host of online music providers led by Napster. Shares of Apple
have dropped 8.5 percent since the announcement of the stock split on Feb. 11,
and have tumbled some 6 percent this week alone.
"Competition
concerns are certainly going to influence how this stock trades," said
Warren West, principal at Philadelphia-based GreenTree Brokerage Services,
which executes trades for institutional investors such as asset managers and
hedge funds. "Investors in general have enjoyed the stock moves, there's a
lot of money that has been made, and people are going to start taking profits _
especially after the split."
Over the last
year, Apple's share price has gone from $23 to an all-time high of $81.99
reached just before the split was announced. Investors must now decide if the
company's share price can maintain such strength in the midst of an more
crowded field.
Sony hopes to
regain some of its luster in an iPod-dominated market by expanding its Walkman
line of digital music players. The new line will store files using flash
memory, which is more lightweight and compact compared to the hard drive used
by most MP3 players, including the traditional iPod.
The Sony players
will retail for as low as $130 _ a bit more expensive than the new iPod
Shuffle, but considered to be a better buy because of a longer battery life and
more features. The new offerings aren't expected to dethrone Apple _ which
holds 60 percent of the portable music player market _ but could give the
Japanese electronics giant the No. 2 position by next year.
Meanwhile, on the
content side, rival Napster recently boosted its sales outlook based on growing
demand of its new "Napster To Go" subscription service. The Los
Angeles-based company _ which expects revenue of about $15 million for its
fiscal fourth quarter _ said consumers are flocking to its newly launched
service that allows unlimited downloads for a flat fee.
Apple, which
charges 99 cents per download, has already been experiencing competition from
music services offered by rivals such as Microsoft Corp., RealNetworks Inc.,
and Yahoo Inc. The company said some 300 million songs have been downloaded
from its iTunes music store since it launched.
For now, analysts
say Apple will continue to see strong sales for its iPod line. The company
received positive comments from Piper Jaffray analyst Gene Munster, who raised
earnings estimates after making his own checks with resellers and retail
stores.
"Our checks
have left us more confident that demand for Apple's key products _ most notably
iMac, Powerbook, Mac mini and various versions of the iPod _ continue to be
ahead of expectations," Munster told clients in a research report.
"We anticipate that strong demand across various segments of the company
will allow Apple to exceed Wall Street estimates for overall revenue and
earnings."
He expects the
company to report earnings of $1.04 per share on revenue of $12.81 billion in
2005, up from previous expectations of a 98 cent per share profit on sales of
$12.25 billion. Analysts surveyed by Thomson First Call expect earnings of
$1.04 per share on revenue of $13 billion. Piper Jaffray, which rates Apple at
"Outperform," also raised fiscal 2006 estimates.
Piper Jaffray told
clients it expects Apple to sell 3.8 million iPods during the second quarter,
including 1 million iPod shuffle models. The firm then expects Apple to sell
4.6 million iPods during the third quarter, with the Shuffle model accounting
for 1.8 million of the sales.
Shares of Apple
fell $1.88, or 4.4 percent, to $40.87 in afternoon trade. PortalPlayer Inc. _
which makes chips that power the iPod _ fell 91 cents, or 3.6 percent, to
$24.28 after it received a downgrade by Kaufman Brothers. Napster shares surge
41 cents, or 5.4 percent, to $8.04. All three stocks trade on the Nasdaq.
Sony's American
Depositary receipts that trade on the New York Stock Exchange rose $1.77, or
4.5 percent, to $41.08.
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