The iPod pitchfork effect?

The jury is still out on whether iPods sold to Windows users are increasing sales of Macs to those same users—the so-called “iPod Halo Effect”. But there seems to be no question—at least in the mind of Creative Labs Inc. President Craig McHugh—that there is an “iPod Pitchfork Effect” at work. Although they had record sales during the first three months of 2005, profits were down.

In McHugh’s words:

“Strong sales of the Zen Micro 5GB [player] and MuVo Micro flash player helped us to achieve sales of 2 million MP3 players in the period. During the quarter we reduced the selling price following sharp price drops by Apple on the Mini and the introduction of flash players as lower than expected prices. These were the major factors in the decrease of gross margins.”

On the gross margins front, things don’t look to get any better soon, In fact McHugh said that the company expects to see gross margins fall towards 20 percent in the next quarter…


Um, boo hoo. If they can get their manufacturing costs down, they can raise their margins.

And 20% isn’t so bad. They should start complaining when they reach 3% margin.

Posted by: CM Harrington on April 22, 2005 02:43 PM

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In which Mark snarks about Creative's mp3 players...

April 22, 2005 | iPod

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