Would $100 iPod compete or cannibalize?

With rumors rife that Apple Computer will unveil a $100 music player at Macworld Expo next month, analysts are split on the likelihood--and wisdom--of such a move.

The widely reported rumors, which Apple declined to address, suggest that the company will unveil an inexpensive iPod that will cover the end of the market dominated by cheaper MP3 players from Creative, Rio and Dell. The risk in such a move would be undercutting brisk sales of iPods, which now range in price from $299 for a 10GB drive to $499 for a 40GB drive. In Apple's fourth quarter, ended Sept. 27, sales of the iPod generated $121 million in revenue, up 9 percent from the prior quarter and 128 percent from a year ago. The company has said the iPod business is profitable.

"I don't think Apple currently needs to sell a $100 iPod at risk of cannibalizing sales of existing models and sacrificing gross margins," said Tim Deal, analyst with Technology Business Research in Hampton, N.H. "Apple already has the market lead, so I don't see the need for (the $100 version) when people are buying $299 and $399 models." Still, other industry analysts think Apple will find more benefit than risk in a low-end iPod, which is expected to be flash memory-based.

News source: C|Net News.com

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