Will Apple Discontinue the iPod?

Apple discontinuing the declining iPod seems to be a "when" not an "if" matter.

May 5, 2014 at 7:05PM

It's hard to believe that Apple (NASDAQ:AAPL) launched the iPod all the way back in 2001. Building on the success of this product, Apple went on to become the world's most powerful consumer electronics company with the subsequent successes of the iPhone and iPad product lines. But the venerable iPod that brought so much good fortune to Apple is looking terminal as a business, and it's unclear whether this product category has much of a longer-term future.

The numbers don't lie
Below is a table of iPod sales over the last eight quarters:

iPod Sales









Units (millions)









Revenue (millions)









Apple's iPod revenue and unit shipment data. Source: Apple

As you can see, the iPod segment has been in freefall over the last couple of years. Units have been cut in half in going from Q2 2013 to Q2 2014 with revenues tracking right along with them. While a part of this is surely attributable to the fact that the iPod Touch (likely Apple's leading iPod product) hasn't been refreshed since October of 2012, the harsh reality is that the iPod is being cannibalized by the iPhone to a pretty severe degree. There is no reason to own an iPod Touch if you own an iPhone, and smartphone penetration continues to grow.

iPod sales will probably keep getting worse
Even at a roughly $500 million/quarter run rate, the iPod represents a $2 billion business for Apple. Further, the incremental R&D required to actually bring this product to market is probably minimal. But the problem here is that expecting even that kind of run rate longer term is probably unrealistic given the continued penetration of the iPhone and, indeed, smartphones in general.

Ipod Touch

Apple's iPod Touch hasn't been updated in nearly two years. Source: Apple 

While some may truly prefer iOS and Apple products and will gladly pay the $229 or above for essentially an iPhone-sized Wi-Fi-only tablet, the value proposition really just isn't there. When you can buy a Moto G for $179 without a contract and get a much faster device that can eventually be connected to a cellular network, it becomes really tough to justify an iPod unless you have a giant iTunes collection. But how many customers have that but don't have a smartphone plan? It's not zero but it's trending to trivial.

Will Apple discontinue the iPod?
The question, then, is whether Apple will just eventually discontinue the iPod in its current form. As long as the product category is profitable for Apple, it will likely continue to sell the current lineup, maybe updating the flagship iPod Touch models with more advanced silicon. But these upgrades will be few and far between as it simply makes more sense to milk existing products for all they're worth.

That said, it is likely that the iPod Touch has about 3-5 years to live before sales are more or less a rounding error for Apple and at that point it will probably be discontinued. The continued rise of fast, low-cost Android smartphones will continue to erode the already shoddy value proposition of the iPod Touch for cost-conscious consumers, and those not sensitive to price probably own iPhones. The demise of the iPod doesn't seem like an "if" but a "when," but given that the iPod's death is at least partially at the hands of the much more profitable iPhone, Apple probably doesn't mind too much.

The iPod is in decline, but Apple's next big thing could drive explosive growth
If you thought the iPod, the iPhone, and the iPad were amazing, just wait until you see this. One hundred of Apple's top engineers are busy building one in a secret lab. And an ABI Research report predicts 485 million of them could be sold over the next decade. But you can invest in it right now... for just a fraction of the price of AAPL stock. Click here to get the full story in this eye-opening new report.

Ashraf Eassa has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information