Thursday, February 17, 2005

iPod eNnvy

You know a fad is getting out of hand when everybody tries to replicate it. And you know this iPod thing is really getting out of hand when a food company tries to compare itself to Apple.

This really happened.

Irwin Simon, the hard-selling CEO of Hain Celestial Group, which owns a slew of natural foods brands ranging from Walnut Acre salsa to Celestial Seasoning teas, recently told Wall Street on a conference call: "We really have--which I call the next iPod of products coming out." (I'm not making this up.) "That's been my challenge...what's the next iPod for Hain?"

Funny thing is, Hain is finally unwinding the remnants of the 'carb' craze products they introduced last year, right as that fad was peaking. So for Apple's sake, let's hope Hain doesn't introduce a music player any time soon.

1 comment:

tiddman said...

I have been following Apple for a few quarters as a possible short. After seeing the last quarter I am glad I didn't.

iPod unit sales in Q1 2005 were more than all of 2004 (4,580,000 vs. 4,416,000). Net income for the company was similar -- $295M in Q1 2005 vs. $276M in all of 2004.

Cap ex for PP&E has only increased from about $40M/quarter to $60M/quarter, so the additional earnings are real "owner earnings". The iPods are a huge profit center.

If that $295M of quarterly net income is sustainable, Apple's forward P/E is in the low 30's. However Q1 is usually their best quarter, so it will probably drop off somewhat.

But how much? How sustainable are the iPod sales? Apple still owns the market, with an estimated 70% market share and the only meaningful advertising campaign for mp3 players (though I saw some new ads for the photo-enabled Olympus player that look like iPod ad knockoffs). The iPod device itself is still superior to the competition in terms of form factor, capacity, and features, and now they are going after the low end of the market with the $99 version and the other price cuts.

Apple has a history of having hit products that come and go, and the company has never been run for the shareholders. No insider has more than a token amount of shares, and the insider sales over the past 6 months have been breathtaking.

If it were possible to predict the cresting of the iPod wave, Apple has a long way to go down...