Merrill Lynch: iPod shuffle demand will outstrip supply

Like the iPod mini a year ago, Merrill Lynch analyst Steven Milunovich believes demand for Apple’s iPod shuffle will outstrip supply. In a research note to clients today, Milunovich said the iPod shuffle could even outsell Apple’s other iPod models this quarter—he said the company is expected to sell 500,000 to 1 million hard drive-based iPods (4G, photo, mini), while the iPod shuffle’s manufacturer is reportedly making 1.2 to 1.5 million units. The analyst said he can see all of those being bought up and more.

Milunovich said new iPod customers and digital music newbies will make up the majority of iPod shuffle buyers. “Our experiences with the shuffle suggests likely strong demand from novices and new-to-iPod users,” wrote Milunovich. “Existing iPod owners may prefer the larger capacity and display of existing iPods, which makes for good market segmentation on Apple’s part. New-to-iPod users tell us the price points ($99 and $149) and ease of use are attractive.”

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