An analyst report says two iPod model delays could take a bite out of Apple earnings.

June 28, 2006

Two models of iPod music players face delays of one or two quarters and could affect Apple’s sales, an analyst said in a report Wednesday.

American Technology Research analyst Shaw Wu wrote in a research note Wednesday that the latest iPod Nano—Apple’s tiny flash-based player that holds 1,000 songs—could come out in the quarter ending in December. The Nano update was originally expected to come out in the quarter ending in September.

Also, a widescreen version of the video iPod, which is key to movie and TV show sales on Apple’s iTunes store, (see Apple Up 9% After Video iPod) had been expected out in time for the holidays. Because of difficulties increasing battery life, as well as screen size, the new video iPod may not ship until the first quarter of 2007, Mr. Wu said.

More than half of Apple’s revenues come from iPod and music-related sales (see Apple Profits Jump 41%). But decreasing growth in players (see Apple’s Leopard Act, Sluggish iPods May Hurt Apple), and delays in pleasing those who still want them, could result in lower-than-expected sales and profits for the company.

‘Unreasonable’ Expectations

“We believe consensus estimates to be unreasonable,” Mr. Wu said in the report. “For fiscal year 2007 we are modeling $22.1 billion [in revenue] and $2.45 in EPS, below consensus of $23.6 billion and $2.58.”

Though Mr. Wu maintained a “buy” rating for Apple stock, he said the firm was reducing its price target to $75 from $101.

An Apple spokesperson said the company does “not comment on rumors or speculation.” Apple shares were down $1.69 to $55.74 in recent trading.

Mr. Wu said the delays could result in improved spacing of times between releases of future models, which could sustain demand in the players.

The current Nano and video iPod, both released last September, created big demand in December but “exhausted Apple’s iPod pipeline for 2006,” he said.

And the new players could be worth the wait. The next Nanos could double storage to 4 or 8 gigabytes, depending on the model. The next generation of video iPod might come with Bluetooth wireless headphones.