I'm not convinced that means they're going to fail, but it's not going to be the coast they had with the iPod.
Obviously Apple doesn't think that it will be, either - their initial target is to capture only 10% of the market.
The question isn't what they think, it's pretty rare that management actually thinks a new product line will fail, the question is what's actually going to happen. 10% is actually a pretty big chunk of market, especially for something running twice the cost of the competition.