iPad Already Taking Away iPod Sales

After analysing newly released data from the NPD group, Gene Munster at Piper Jaffray thinks the iPad’s early success is already affecting iPod sales.

This afternoon NPD reported Apple’s iPod sales are down 17% year-over-year for April. Gene was expecting iPod sales to only be down 9% for the quarter.

The NPD data suggests sales of 9 to 10 million units for the entire June quarter, which is range of -12% to -2% for year-over-year declines. (The street expects -7% for the quarter.)

While iPod sales are down, Apple’s Mac business is going strong. Sales are up 39% for April on year-over-year basis, according to NPD. This suggests sales of 3.1 to 3.2 million units for the June quarter.

That would be growth of 19% to 23% year-over-year for the June quarter, which is slightly stronger than street expectations of 19%.

With Mac sales remaining strong, and iPod sales falling more than expected, Gene thinks the iPad is cannibalising iPod sales. This is a positive because the iPad has an average selling price that’s 4X as high as an iPod, with a similar margin.

Here’s Gene’s take on iPad eating up iPod sales:

The iPad Effect: NPD Data Suggests iPad’s Cannibalization of Macs Is Minimal; iPod Cannibalization A Positive. The iPad launched in US Apple retail stores on 4/3, impacting nearly the entire month of Apple’s sales in April. As a result, April NPD data gives us the first sign of the degree to which the iPad cannibalizes iPod or Mac sales. From the early NPD data, it appears that the iPad has a minimal cannibalization impact on Mac sales, and could be slightly cannibalising iPod sales. Given the ASP (4x) and margin profile of the iPad, we see this as a net positive for Apple’s business. We believe in the long run Mac cannibalization will exist, but will be minimal. Apple has successfully limited the iPad functionality to primarily content consumption, vs. content creation on a Mac. And relative to the iPod, the physical size of an iPad provides a meaningfully different value proposition (portability vs. screen size).

BONUS: My Excellent iPad Adventure

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