Back in 2006, Apple (NASDAQ: AAPL ) was riding high on the success of its iPod.
The gadget accounted for more than 50% of Apple's first-quarter revenue that
year as a digital music revolution was in full swing. Now the iconic iPod is an
afterthought, bringing in a mere 8% of Apple revenue and falling fast as other
gadgets take over the digital jukebox role on top of many other functions. So
could Apple pull a page out of the Netflix (NASDAQ: NFLX ) handbook and
voluntarily kill off a dying segment of its business? Would it make sense for
Apple to refocus, rather than just running the iPod into the ground? Despite
several innovations like the Nano touchscreen or the cheap Shuffle model, the
iPod has been in steady decline in importance for Apple. Granted, the importance
is in part because revenue at Apple has soared thanks to breakneck growth and
simply standing pat would mean a smaller share of the pie as the pie got bigger.
But less than 10% of total revenue and falling is caused by more than just
growth in other segments. As the world gears up for the iPhone 5 launch, stock
market analysts are quick to point out the importance the smartphone has in
regards to the bottom line of Apple. In Q2, the iPhone racked up more than $12
billion in revenue despite being an "old" model launched in June 2010. So
one has to wonder if Apple would be better off bailing out of the iPod biz and
focusing its marketing, development and production on its vaunted iPhone
instead. According to rumors from Apple's supply chain , the company might
already be doing that. Apple is not doing much of anything to refresh its iPod
Touch. Not much love for a groundbreaking piece of consumer tech that, like
Kleenex and Xerox, became a brand that is synonymous with a whole category of
products. This hints Apple might trim its four varieties of iPod soon the
stripped-down Shuffle for $49, the small touchscreen Nano for $149, and the iPod
Touch and Classic for more than $200. It makes sense when you think about it at
those price points. Why would anyone pay a more than a hundred dollars or in
the case of the mammoth 160 GB model, $250 for an MP3 player when an iPhone or
iPad can do that and so much more? There may be a niche hardcore entertainment
junkie who wants tens of thousands of songs or 75 feature-length movies on an
iPod. But with the launch of Apple's iCloud that will allow access to media on
any device, that niche has other ways to connect with Apple. Some think the iPod
Classic and its trademark clickwheel will be eliminated as soon as the big Apple
event in October. NFLX stock was slammed on its loss of 1 million customers
after the recent dual-pricing move, then Netflix CEO Reed Hastings took some
heat for making a move away from DVD sales. Apple could face similar backlash
from angry iPod fans. But the difference is that Apple is not killing a wildly
popular device or service and making customers jump through new hoops. It simply
would be phasing out a fading product that is increasingly becoming irrelevant
in part because of Apple's other successful products. Jeff Reeves is editor of
InvestorPlace.com. As of this writing, he did not own a position in any of the
stocks named here. Write him at editor@investorplace.com , follow him on Twitter
via @JeffReevesIP and become a fan of InvestorPlace on Facebook .
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