In the run-up to the iPhone's debut, new data show that
is gaining strength in sales of music and Mac personal computers.
Market tracker NPD Group said Apple's iTunes music downloading site became the No. 3 music retailer in the first quarter, with its digital downloads outpacing
combined sales of downloadable songs and compact discs.
NPD also found that Apple's Mac notebooks are gaining market share as unit sales outpace the overall market growth.
For Apple investors, the numbers are increasingly important as iPhone hype inflates the stock price, and potentially sets it up for a fall if the device fails to be the big winner that analysts and the company expect. Strength in Apple's existing iPod and Mac businesses can help the company weather volatile sales of iPhones -- and corresponding movements in its stock price.
The new data show that iTunes, the leading online digital music retailer since 2003, is gaining share of the total music market as digital downloads account for more of songs sold. Only
stand ahead of Apple, claiming about 16% and 14% of total unit sales, respectively. Apple's share now stands at 10% of unit sales vs. 7% for both Amazon and
NPD considered 12 music downloads as equivalent to the sale of one entire album.
Rather than a significant revenue contribution of their own, Apple's music downloads are more significant for their ability to boost sales of iPods and iPhones.
Like the iPod, the iPhone's success depends in part on consumers looking for a complete entertainment device that melds various music and video features. With consumers actively using iTunes, they're likely to see the iPhone as a device that not only has the capacity to play videos and music, but also has a deep selection of content to choose from.
Apple's products are linked together in an "ecosystem" where success of one can help contribute to the success of others, says Piper Jaffrey analyst Gene Munster. With more people downloading music from iTunes, the base of potential iPhone buyers is increasing. Analysts have also called this phenomenon the "iPod halo effect," in which customer use of one Apple product spurs curiosity in, and ultimately purchases of, other products.
Munster does not own Apple shares. Piper Jaffrey does not perform investing banking work for Apple, but does make a market in Apple shares.
Whether it's called a halo effect or an ecosystem, the phenomenon extends to Macs as well, says Fati Naraghi, director of technology and telecom research at Newton Investment Management, a unit of Mellon Financial. Several Newton funds own shares of Apple.
In May, Macs accounted for 13% of computer sales at both online storefronts and at physical locations, up from 11.6% in April, according to NPD figures. The gains largely came on the back of notebooks sales, which are more profitable than desktops. NPD analyst Stephen Baker attributed the sales growth to Apple's switch to
-based processors and beefed-up storage capacity.
Total Mac unit sales surged 67% compared to May of last year, vs. a 37% increase for
This is good news for investors who face uncertain consumer response to the iPhone.Last week, market tracker IDC said that 60% of 456 survey participants were unlikely to buy the device -- though they are interested in it. Many cited the iPhone's price -- $499 for the base model and $599 for additional memory -- as well as the cost of switching cell phone service carriers to
, which will be the exclusive service provider for five years.