Posted on: Tuesday, July 20, 2004

Apple cuts iPod price by 25%

By Connie Guglielmo and Dana Cimilluca
Bloomberg News Service

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

The fourth-generation iPod introduced by Apple today costs $399 for 40 gigabytes of storage and $299 for 20 gigabytes, Apple said in a statement. The previous models cost $499 and $399. The iPod can hold as many as 10,000 songs, Apple said.

The price cuts and improvements to the iPod come as Sony Corp., Digital Networks North America Inc., maker of the Rio line of players, and others plan to introduce new music devices in coming months, analysts say. Demand for the iPod, which rose threefold to 860,000 units in Apple's fiscal third quarter ended in June, 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, Calif. "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 Cupertino, Calif.-based 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 $1.26 billion and third-quarter revenue of $2.01 billion was the highest in eight years, Oppenheimer said.

The iPod is the best-selling digital music player in the United States, accounting for 39 percent of the $40.3 million spent on such devices at retail stores during May, according to The NPD Group Inc. in Port Washington, N.Y.

Shares of Apple have risen 51 percent this year.