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Apple Shuffles the Deck!

The king of digital music players slashes prices and rolls out a low-priced nano.
/ Source: Motley Fool

If you're in the market for a low-end iPod, Apple Computer(Nasdaq: AAPL) has some sweet news for you. The company is introducing a $149 iPod nano (with half the capacity of the 2-gigabyte models that retails for $199) and is slashing the prices on its shuffle players.

The iPod shuffle is now being marked down to $69 (formerly $99) for the half-gig model and $99 (formerly $149) for the full-gigabyte model. The shuffle is light and compact but does not have the benefit of a menu screen (hence the name, as it shuffles through the songs and podcasts that are loaded in a random fashion).

As a sign of changing times, Apple shares rose this morning on the news. There was a time when lower prices used to send analysts scrambling, fearing tighter margins and price wars. These days, everyone understands what Apple is all about.

More iPods in place doesn't just mean the one-time sales. It's the catalyst for growing sales of digital downloads at its iTunes stores, as well as for lifting the Apple brand higher into the mainstream in a move that has helped Apple sell more of its higher-margin computing products.

Yes, the iPod shuffle would make a decent shoehorn or doorstop, depending on your metaphor of choice. Taken literally, I'm guessing the shuffle would perform admirably as well on both fronts.

Cheaper iPods may be welcome news to you and me, but it's not all that endearing to Apple's competitors. Companies like Creative Technology(Nasdaq: CREAF), Sony(NYSE: SNE), and iRiver will need to react accordingly now that the lower end of the market just got lower. It won't be easy for them. They don't have the benefit of running a popular digital download store (even though Sony owns one of the major music labels) or selling Macs to the point of justifying cutting prices for the sake of moving product.

Apple sold 14 million iPods last quarter. Nobody else even came close. Since its inception, Apple has moved more than 42 million iPods and delivered 850 million iTunes tracks. It's quite the empire and now. At $69, the iPod is likely to penetrate even further into the mainstream. Granted, that market is less likely to be paying for digital downloads or shelling out four figures for their next computer than the first wave of iPod adopters but Apple wouldn't mind the masses. There is strength in numbers.

Apple learned that the hard way when the Intel(Nasdaq: INTC)-powered PC market left it behind as simply a high-end niche player. Now, it's payback time. Apple controls the digital media player space, and this year Intel is fueling the Mac revolution, too.

How about that for the ultimate sign of changing times?

Longtime Fool contributor Rick Munarriz thinks that an Apple a day will help keep the short sellers away. He does not own shares in any of the companies in this story. The Fool has a disclosure policy. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.