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Wed, Jul 21, 2004 - Page 12 News List

Apple cuts price of iPod digital music player by 25%


Apple Computer Inc slashed the price of its top-selling iPod music player by as much as 25 percent to preserve its lead as Sony Corp and other competitors enter the market.

Apple, the maker of Macintosh personal computers, introduced its fourth-generation of the iPod, raising the minimum storage capacity to 20 gigabytes from 15 gigabytes for US$299.

A 40-gigabyte version now sells for US$399, down from US$499. The iPod can hold as many as 10,000 songs, Apple said.

Competitors including Sony and Digital Networks North America Inc, maker of the Rio player, plan to introduce music devices in coming months, analysts say.

Demand for the iPod, which tripled to 860,000 units in Apple's fiscal third quarter, helped boost sales 30 percent from a year earlier.

"Apple is the market leader and it's their position to defend," said Rob Enderle, an analyst at the Enderle Group in San Jose, California. "They realize they are going to be in a fierce competitive position and they are starting the price war themselves."

The iPod has also helped bring in new buyers for Apple's Macintosh, with computer shipments reaching their highest in almost four years, Peter Oppenheimer, chief financial officer for the company said last week.

Apple shipped 876,000 Macintosh units in its fiscal third quarter, a 14 percent increase from a year earlier. Sales of Macintosh desktop and portable computers rose 15 percent to US$1.26 billion and revenue of US$2.01 billion in the quarter that ended last month was the highest in eight years, Oppenheimer said.

Apple decided to introduce the new models and pricing in time for the back-to-school shopping season, said Greg Joswiak, vice president of hardware product marketing.

"We want to continue to own the market and we said we would stay very aggressive," he said. "It makes it extremely tough for competitors to wedge their way in."

The iPod is the best-selling digital music player in the U.S., accounting for 39 percent of the US$40.3 million spent on such devices at stores during May, according to The NPD Group in Port Washington, New York.

The Rio player was second, capturing 15 percent of sales that month, NPD said.

It has also been one of the pricier hard-disk based music players, with comparable 20-gigabyte versions from Digital Networks and IRiver priced at US$299 to US$329, according to the company's Web sites.

"The lower price point helps to increase adoption among a broader base of users who are interested in music and not necessarily interested in gadgets," said Mark Mowrey, an analyst for Al Frank Asset Management in Laguna Beach, California, which owns Apple shares.

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