Piper Jaffray analysts Gene Munster and Michael Olson on Friday issued a research report that gave both Apple and Napster an "A" rating in terms of Web site traffic. Apple, however, was the "clear winner" because it has "the highest Web traffic rank (64) of the four [companies examined] and has also seen the most increase in Web traffic rank and reach over the past three months. Napster's marketing appears to be having a positive impact on traffic."

The rank Mr. Munster and Mr. Olson refer to was taken from Alexa.com, a Web site that monitors traffic on the Web. While the analysts acknowledged that "not all visitors to Apple.com use iTunes, we do believe Apple traffic is indicative of interest in Apple's iPod and iTunes." According to them, traffic to Apple.com was up 11% and reach increased 11% during the past three months, while Napster.com saw a 7% increase in traffic and a 21% jump in reach.

Audible.com, which saw traffic drop 9% and reach increase 2%, earned a "B" from the analysts while Real.com picked up a "C" because its Web traffic dropped 4% and reach improved by 4%. "Both rank and reach for Real.com have been range bound over the last 6 months. Rhapsody.com traffic was immaterial as the majority of Rhapsody users enter through Real.com," Mr. Munster and Mr. Olson wrote.

Yahoo! Music, which launched just recently, received no grade. Mr. Munster and Mr. Olson said: "Though we do not have historical data to state a trend, 1% of all Yahoo.com's users go to Yahoo! Music, which we will monitor going forward."

Earlier this week, Piper Jaffray also issued a pair of reports dealing with Creative's revenue forecast cut and Apple's move to put color screens on all its full-size iPods. Of the former, Mr. Munster recalled his survey of retailers from the previous week, which showed that 58% of salespeople were recommending the iPod while only 16% were pointing customers toward Creative's products. Thus, he wrote this week: "We believe these checks provide another indication that Apple is holding its ground, if not gaining momentum, as the leader in portable audio."

The latter event, which also included a price cut on the 1GB iPod shuffle, consisted of "proactive steps by Apple to continue to gain market share," Mr. Munster wrote. "We believe the addition of color/photo features to the 20GB iPod brings Apple up to speed with some of its competitors that had already incorporated color/photo into MP3players at, or around, this capacity. The lower pricing on the iPod shuffle will allow Apple to continue to dominate the flash-based device market and we do not expect margins will be significantly impacted, due to declining flash memory pricing."

Mr. Munster and Mr. Olson continue to reiterate their "Outperform" rating on Apple's stock, with a US$52 12-month price target. Apple's stock closed Friday at $36.50, down .84% in light pre-holiday trading.

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