SanDisk Presses Apple’s Baby

Flash memory maker SanDisk announced its own version of what could be an iPod killer.

The 8GB Sansa e280 can hold 2,000 songs, offering consumers
twice the storage of the similar-priced Apple
iPod Nano.

The MP3 player features audio, photo-viewing and video-clip playback capabilities and costs $249.99.

Sandisk

The Sansa is after the Nano.

Source: Sandisk

At the same time, SanDisk dropped prices on its other digital music
players. Since entering the fray two years ago, the company has become
the only company to successfully compete against Apple’s iPod dynasty.

Flash memory comprises up to 75 percent of the cost of memory-based
MP3 players, Eric Bone, SanDisk’s director of audio/video product
marketing, told internetnews.com.

“Since we make the Flash memory, we essentially remove the middle man
and pass the savings directly to the consumer,” Bone said in a
statement. “We have a chance to upset the Apple cart.”

Ross Rubin, analyst with NPD Group, said SanDisk is an interesting phenomenon. Until recently, the memory company had no brand in the
music space.

What they did have was very close ties to Flash memory manufacturing,
according to Rubin. Their lead in Flash memory was able to get their
products on shelves.

In one year, SanDisk has more than tripled its share of MP3 players,
jumping from 3.1 percent of sales in 2005 to 9.7 percent this year.

The jump put it in second place behind Apple’s 75.6 percent and ahead of
Creative’s with less than 5 percent of digital music player
sales, according to NPD.

SanDisk’s success, in an area few have found traction, wasn’t due to
emulating Apple.

While others tried to beat Apple at its own game,
SanDisk focused on its partnerships with Best Buy and Circuit City.

Salespeople recognized the SanDisk brand and more easily recommended
the memory maker as an iPod alternative, according to Bone.

As the MP3 player market matures, consumers are open to other
choices, Stephanie Ethier, an In-Stat analyst said.

Along with greater comfort thinking beyond Apple, “there’s somewhat
of a ‘cool factor'” when people don’t buy an iPod, according to Ethier.

Apple is still “pretty invulnerable” to challengers, said Ted
Schadler of Forrester Research.

However, that could change as SanDisk
approaches double-digit market share, something no other company has
been able to accomplish, according to Schadler.

SanDisk’s growth in the digital music area cannot continue without
affecting Apple, said Rubin.

However, there could be a warning for
Microsoft in SanDisk’s growth, according to the analyst.

As SanDisk’s growth in digital music has cost smaller competitors, such as Creative Technologies or Samsung,
the entry of Microsoft’s Zune device
could hurt partners of the software giant more than the iPod.

Although Bone said SanDisk won’t abandon its bread-and-butter memory
market, the sector is transforming from dumb storage to smart
devices enabling users to launch applications.

“It’s quite clear people are becoming very comfortable with Flash
memory,” said Ethier, who believes the SanDisk MP3 player will
compete with iPods on holiday gift lists.

Schadler foresees Flash memory jumping from music players to video
devices allowing users to visit YouTube or download movies while on
the go.

An explosion of devices has opened more opportunities for Flash
memory. “The juggernaut was the mobile phone market,” according to
Rubin.

While SanDisk is enjoying the press attention from its bid to unseat
the iPod, the company plans to concentrate on the low-end market,
planning a sub-$100 digital music player, according to Bone.

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