iPod Mania Causes Shortage

Once upon a time, holiday shoppers fought over Cabbage Patch Dolls and Beanie Babies.

This year, they're going to the mat over iPods. The world's most popular portable music player is in short supply, leaving many potential gift buyers disappointed. Apple Computer has been unable to keep up with demand for the sleek little player, a Stereophile "Recommended Component." Most models are on back-order, and most retailers are completely out of stock, according to retailing reports that appeared in mid-December.

Among sources where you are unlikely to find an iPod in time for Christmas are Best Buy, Target, J&R Electronics, Crutchfield, and Amazon.com. Apple stores, typically not easy-access locations, still have a few, as does the Apple website. The music players are available at a steep premium through unauthorized resellers on eBay, which this past spring added a new category solely for iPods. The bidding for a new $250 list-price iPod Mini begins at $380 on eBay.

Last year, Apple had to delay its European launch of the iPod due to short supply. The company has expanded its manufacturing contracts to try to meet demand, but may not have anticipated how quickly the player was gaining popularity. "It may just be they can't build them fast enough," commented NPD Group analyst Stephen Baker. The iPod is one of "the most highly demanded products I've seen," Crutchfield's senior director of merchandising David Weisman told the financial press.

Temporary retail problems may be irritating to shoppers, but in this case they are sweet music to investors. The value of Apple's stock, currently around $65/share, has tripled in the past year. On December 14, Barron's Online rated Apple stock a "buy" based on a report by American Technology Research (ATP) finding that " . . . the success of Apple's iPod can continue to impress in potential market size and consumer popularity . . . " and that the market for portable music players "may still be early in its adoption ramp." The iPod could eventually displace the Sony Walkman as the most popular music player ever made, ATP analysts believe. Sony has sold more than 300 million Walkmans in various guises over the product line's 25-year history.

The iPod represents almost 93% of the market for hard-disk–based portable music players, according to NPD Group. It's one of the most popular and rapidly adopted products in the history of consumer electronics, and now accounts for almost one-quarter of Apple's annual revenue. Apple has sold approximately 5.7 million iPods since the player's debut in October 2001. Sales for the 2004 winter holiday quarter were projected to approach four million units, a number not likely to be achieved because of the shortage.

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