Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



More Sweet Music for iPod

Summer ought to be a time to slow down and relax, right? Not if you're Apple's (Nasdaq: AAPL  ) white-hot iPod. Yesterday PortalPlayer (Nasdaq: PLAY  ) , which makes the intelligence that powers the cultish digital music player, said it expects big sequential sales gains in the third quarter, which ends in September.

The news came in PortalPlayer's second-quarter earnings release. CEO Gary Johnson said in a statement that gains from new designs built for flash-based music players -- such as those from iRiver, Creative (Nasdaq: CREAF  ) , and Samsung -- could boost revenue to between $50 million and $60 million. That would equal gains of at least 12% sequentially and nearly 100% year over year. Certainly the flash players will have some impact, but remember, this is a company that gets close to 90% of its sales from Apple. It's easy to believe that much of PortalPlayer's expected Q3 upside comes from pent-up demand for the iPod.

Analyst estimates bear this out, too. A check of Yahoo! Finance shows the Street was expecting $0.30 per share in non-GAAP earnings for the third quarter and $51.22 million in sales. Both are at the very bottom of the company's projected ranges. Yet neither number has pleased investors. Instead, the stock trades roughly 6% lower as I write.

I think I know why: A look at the Q2 financials reveals that revenue was flat sequentially. That seems odd when Apple sold 800,000 more iPods over the same period. And even if product cycles don't quite align, sequential growth between Q1 and Q2 iPod shows similar unit growth gains. Apple's iPod revenue was also up 8.8% during its fiscal third quarter. PortalPlayer can't be expected to ape those gains precisely, of course. But it ought to get at least within spitting distance. It didn't -- and investors probably noticed.

PortalPlayer is an interesting company at the center of a remarkably popular market. Some have undoubtedly sought the shares as a way to get in on Apple's meteoric rise without paying the same premium. Sorry, but that's just plain silly. Much as I remain impressed by its growth, inventiveness, and -- even to some degree -- valuation, PortalPlayer is entirely subject to the whims of Apple and flighty consumers. And, as the numbers bear out, it doesn't always get the full benefit of the popularity of its chief customer.

Bottom line: If you really want to make money off the Pod people, Apple is still your best bet. Period.

Whistle up related Foolishness with these tidbits:

Does the prospect of taking on a little extra risk in exchange for multi-bagger returns wet your whistle? Well then don your belled cap, Fool, and take a risk-free trial to Motley Fool Rule Breakers. Or sign up now and let David Gardner buy you a copy of our Blue Chip Report, which contains 10 picks from our best analysts for the decade ahead. Either way, your portfolio will thank you.

Fool contributorTim Beyersstilldoesn't have an iPod. Geek. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what's in his portfolio by checking Tim's Fool profile, which is here. The Motley Fool has an ironclad disclosure policy.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 494471, ~/Articles/ArticleHandler.aspx, 10/28/2016 7:40:02 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,161.19 -8.49 -0.05%
S&P 500 2,126.41 -6.63 -0.31%
NASD 5,190.10 -25.87 -0.50%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/28/2016 4:00 PM
AAPL $113.72 Down -0.76 -0.66%
Apple CAPS Rating: ****
SNE $31.49 Down -0.04 -0.13%
Sony CAPS Rating: ***