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Originally published Thursday, February 24, 2005 at 12:00 AM

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Apple cuts iPod price, shows off new models

Apple Computer slashed the price of its iPod mini by 20 percent and introduced new models to build on demand that has made the iPod the top-selling digital music player in the United States.

Bloomberg News

Apple Computer slashed the price of its iPod mini by 20 percent and introduced new models to build on demand that has made the iPod the top-selling digital music player in the United States.

Apple cut the price of the 4-gigabyte iPod mini, which holds about 1,000 songs, to $199, and said a new model that holds 50 percent more music is $249. A new version of the 60-gigabyte iPod that stores photos and as many as 15,000 songs costs $449, compared with $599, Apple said yesterday.

10 million iPods sold

The new models may help Apple widen its lead over competitors such as Dell, said Gene Munster of Piper Jaffray. Chief Executive Steve Jobs is using the iPod to expand sales and draw consumers to the company's more-profitable Macintosh computers. Apple has sold more than 10 million iPods since 2001.

"Apple's changes to the product line are more offensive than defensive," Munster wrote in a note to investors yesterday. He rates the shares "outperform" and doesn't own them.

Apple shares rose $2.94, or 3 percent, to $88.23 yesterday. The company said Feb. 11 it will split its stock 2-for-1 after the shares more than tripled in the past year on surging iPod demand. Split-adjusted trading will start Friday.

The price changes and new models are part of Apple's plan to offer a "compelling line of rational sell-ups," said Greg Joswiak, vice president of iPod product marketing. In most cases, paying $50 more for the next iPod up in the product line gives customers 50 percent more storage, he said.

New accessory

A new $29 accessory called the iPod Camera Connector, to ship next month, will let users transfer photos from a digital camera and view them on the iPod Photo's color screen, Joswiak said. Among new products is a 30-gigabyte iPod Photo, which costs $349.

Apple's decision to cut prices on the iPod Photo suggests "demand has been less than spectacular since its October debut," said Merrill Lynch analyst Steven Milunovich.

Jobs introduced the iPod mini, in five colors, in January 2004. Since then, Apple has shipped the iPod Photo and a special edition black-and-red player with rock band U2. Last month, Apple unveiled a lower-priced iPod, called the shuffle, that relies on flash-based memory instead of a hard disk drive to store songs.

The shuffle starts at $99 and weighs less than an ounce.


Milunovich at Merrill Lynch expects the company to sell 1 million shuffles this quarter and about 3 million other iPod models, he told investors yesterday. Apple sold 807,000 players in the period a year earlier.

The new generation of iPods minis offers battery life of up to 18 hours, more than twice as long as the previous models' 8- hour battery life, Jobs said in yesterday's statement.

The new minis are available in four colors, silver, pink, blue and green, that are more "vibrant" than the first-generation players, Joswiak said.

"Halo effect"

The company is benefiting from what analysts have dubbed the "iPod halo effect." Sales of the iPod are spurring orders of other Apple products.

To tap into that interest, in January Jobs released the least expensive Mac in the machine's 21-year history. Called the Mac mini, it starts at $499 and ships without a monitor, mouse or keyboard.

Apple's sales were aided by climbing demand for consumer electronics during the November-December shopping season, selling 4.58 million iPods last quarter. Sales of the iPod, Apple's fastest growing product, surged to $1.21 billion from $256 million a year earlier.

Mac sales also rose last quarter, with Apple shipping 337,000 iMacs. That made the latest iteration of the consumer computer, released in September, its most popular. Total Mac shipments rose to 1.05 million, the highest number of quarterly shipments in more than four years.

Bloomberg News reporter Scott Lanman in Washington, D.C., contributed to this report.

Apple-buyout rumors boost Tivo shares

Shares of Tivo surged yesterday because of Internet speculation that Apple Computer may be planning a bid to buy the company that popularized digital-video recording of television shows.

Tivo's shares closed up 68 cents, or 18 percent, to $4.38 yesterday.

Spokesmen for Tivo and Apple declined to comment, saying the companies don't respond to rumors.

Speculation about a possible acquisition has appeared on a number of Internet message boards and Web blogs in the past.

However, the cable news channel CNBC mentioned the talk yesterday, which may have increased its effect on the stocks, analysts said.

Stanford Financial Group analyst Frederick Moran, who acknowledged the impact of CNBC's report, said the timing might be right for such a deal.

"We have recently heard about management changes and defections (at Tivo), which perhaps signal a change in direction at the company," Moran said.

Moran said new Tivo management may be more receptive to potential acquirers.

So far this year, Tivo President Marty Yudkovitz and its founder and chief executive, Mike Ramsay, have each announced plans to leave their respective posts.

No replacements have been named yet.

SunTrust Robinson Humphrey analyst Christopher Rowen said while he would not rule out Apple as a likely acquirer for Tivo, the company would "not be the first that comes to mind."

Rowen noted that Tivo's 3 million subscriber base is an attractive entry point for companies like Apple, Microsoft, Sony, Motorola or News Corp., which are looking to get into the "digital" living room.

"I think the reason that takeover talk has such a large affect on Tivo share price is that investor concern isn't near-term performance, or product quality, but the strategic box they appear to be in," Rowen said.

None of the analysts quoted in this report disclosed conflicts.

The Associated Press

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