Apple 4Q08 Sales Highlights

Apple released its calendar year 4Q08 earnings this afternoon. Here is a quick recap of the numbers and growth I care most about:

iPod: 22.7 million units for the quarter, slightly higher than my projected 21.9 million units. This gives Apple total sales of 55.3 million units in 2008, up 5% year over year. Average selling price dropped slightly from $150 to $149, indicating that holiday sales did not help Apple sell more high-end models. As a result, iPod revenues in 2008 dropped 4% year over year. Apple said in the earning release that iPod growth came mainly from the international market.

iPhone: 4.36 million units shipped during the quarter, down from 6.9 million in 3Q08. This was lower than my estimate of 5 million units, and it looks like the recession did have some impact on iPhone demand. But more than 11 million iPhone sales in two quarters is still a great achievement

Apple TV: The Company reported 300% yoy volume growth in 4th quarter, but volume was still low overall. Tim Cook, the acting CEO of Apple, referred to Apple TV as “still a hobby.”

Other Music Related Products and Services: This is where the iTunes sales are reported. Revenue topped $1 billion for the first time, up from $832 million in 3Q08 and a net increase of almost $200 million over 4Q07. A large portion of the contribution should come from Apple App store sales, if we assume modest increase in year-over-year iTunes music and video sales. Of course, rental revenues also helped.

It looks like not a bad quarter for Apple, except for the weaker unit sales of iPhones. Since this is only the second quarter of iPhone 3G on the market, its seasonality and demand strength is a bit difficult to model. Given the disappointing mobile handset shipment numbers from Motorola, Palm and Sony Ericsson reported last week, the first half 2009 could be tough even for the smartphone market.

New iPods and Zunes Upcoming, Why Bother and Will Consumers Bite?

Apple unveiled its new iPod lineup yesterday. But media and Apple fans seemed to give a yawn to the event. No more “one-more-thing” hype and exuberance in San Francisco yesterday. Even the stock market slapped down Apple shares ruthlessly amidst overall market slide.

One or two days before Apple’s scheduled product showcase, Microsoft announced its third-generation Zune players. Despite the fact that Zune has never reached even one-tenth of iPod sales volume, Microsoft has been patient and persistent in its catching-up game.

Early adopters and tech junkies might already feel bored about the whole MP3 player category. The entire industry’s attention is on the sexy iPhone and its many copycats and would-be killers. True. If you look at MP3 player penetration among all households, it already crossed the 40% mark in early 2008 based on Parks Associates’ National Technology Scan survey. The growth will slow down, inevitably. That’s also true.

But the press and the pundits missed a point. Behind these tiny and shiny gadgets is a gigantic and still-under-tapped digital content distribution market, and portable devices are the first and will continue to be an important platform to groom it till it explodes.

Back to the hardware, both makers have made important upgrades, from form factor to functions, from user interface to experience-enhancing new features. They lowered the prices too. Although the new devices are less alluring in the eyes of technology aficionados, the other 60% of the U.S. households will find bargains and better values after a not-too-long waiting period (two years, perhaps). Yes, the growth curve will flatten out, but 50-60 million iPods a year for Apple is not bad at all, definitely an envy to other players in the field.