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Apple (Nasdaq: AAPL) announced Wednesday that it is forming an independent division for the iPod, its iconic digital music device and the counterpart to Apple's iTunes Music Store (iTMS). Jon Rubinstein ["Apple SVP Jon Rubinstein on the Reinvention of Hardware," MacNewsWorld, January 19, 2004], formerly Apple senior vice president of hardware engineering, will lead this new division.
Apple has sold more than 3 million iPods and iPod Minis in the three years since the device's 2001 debut. Apple sold 807,000 iPods during the first quarter of 2004 -- more than the number of Macintosh computers sold in that time period.
Wednesday's news followed on the heels of an announcement by Apple CTO Avie Tevanian stating that the company is slowing the pace of OS X development.
Apple would not comment on the news; however, the company said in a statement to the press Wednesday that "this organizational refinement will focus our talent and resources even more precisely on our industry-leading Macintosh computers and the wildly successful iPod."
Beyond the Mac
Michael Gartenberg, vice president and research director at Jupiter Research, told MacNewsWorld that neither of Apple's announcements should be seen in a negative light.
When asked whether Apple is shifting its focus from the Mac toward the iPod, Gartenberg replied that the company's management shift is more an acknowledgement of the need to more clearly demarcate between its consumer and enterprise lines of business.
"Apple recognizes that their market goes beyond the Mac now. The digital entertainment market, of which digital music is just one part, is growing and includes the Windows platform," Gartenberg explained. "It is the beginning of a digital revolution where consumers want all their digital entertainment in one place -- music, movies and more."
According to Gartenberg, Apple's move to slow OS X development is an attempt to ratchet back expectations from one release per year to one every other year. This decision allows Apple to more easily integrate iPod-related enhancements into future Mac OS releases while also offering the flexibility to explore iPod innovations for Windows and other non-Macintosh environments.
IPod Market Share
For his part, Inside Digital Media senior analyst Phil Leigh asserted that the numbers explain everything.
"The recorded music market is a $12 billion market in the U.S., $35 billion globally," Leigh told MacNewsWorld. "Apple says they account for 50 percent of the dollar value of all digital portable music players and 30 percent in unit count."
As delivery of recorded music shifts to the Internet, those market shares will be worth significantly more in dollars. "There is nothing more important to Apple than maintaining the leadership position in the digital music market," Leigh said.
"People simply want to buy the iPod more than any other device," he added. "This includes a rapidly growing market of Windows users."
The Future and iDevices
According to Yankee Group senior analyst Mike Goodman, Apple's reshuffling of divisions indicates the company could be forging an entertainment division. In addition, the change may improve Apple's control over supply-chain issues as the iPod Mini goes international.
"This can simplify managing the supply and demand if the iPod division can independently handle the process," Goodman told MacNewsWorld.
While it is too early to determine the direction the iPod division will take, Goodman said, the group will need to pursue innovation and generate a stream of products independent of OS X.
"While the iPod is hugely successful now, what about in 10 years? There had better be new products on the market," he said.
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