IE 11 is not supported. For an optimal experience visit our site on another browser.

Apple cuts iPhone price and revamps iPods

By Scott Hillis
/ Source: Reuters

By Scott Hillis

SAN FRANCISCO (Reuters) - Apple Inc sharply cut the price of its iPhone on Wednesday and revamped its full iPod line, including adding a model with a touch screen that can browse the Web and buy songs wirelessly.

While a $200 cut in the price of the most powerful iPhone to $399 raised some investor concerns about demand, the move and an array of new iPods, such as tiny colored nanos with video screens, left analysts forecasting Apple would stay ahead of the pack among gift-givers at the crucial year-end sales.

"It's hard to see how anyone is going to take much ground away from them this holiday," said Jupiter Research analyst Michael Gartenberg.

The new touch-screen iPod, from $299, will have many of the features of the iPhone, including the ability to connect to the Internet using Wi-Fi wireless technology, and a mini Web browser that can view YouTube videos and search on Google Inc. and Yahoo Inc sites.

The revamped iPod line ranges from $79 clip-on, colored "shuffles" to the multifunction iPhone. Apple also said it iTunes online store now lets iPhone users turn songs into ring tones and can sell songs wirelessly to the iPhone and touch- screen iPod, bypassing the computer for the first time.

Apple Chief Executive Steve Jobs said in an interview he still expects the iPhone to roll out in Europe in the next quarter and that the touch-screen iPod, which is similar to the iPhone, could do well in Europe.

Jobs also told CNBC in an interview he hoped a long-awaited deal to sell Beatles songs could come within six months.


Shares of Apple had been on a tear since the company said it would make the Wednesday announcement, rising 13.5 percent in the past week on Nasdaq. A 5 percent fall to $136.76 on Wednesday left it with most of the recent gains -- and a 70 percent rise for the year so far.

The shares of iPhone service provider AT&T Inc , which are up about 13 percent this year, fell 1.4 percent to $39.73 on the New York Stock Exchange.

Analysts were mixed on whether Apple had planned the price cut and if it showed a sign of weakness. The company said it was on track to sell a million phones by the end of September.

"Apple has always been aggressive with price cuts to keep the competition at bay," Shannon Cross of Cross Research said.

But Peter Dunay, an investment strategist at Leeb Capital Management, said the cut helped send shares down.

Jobs. dressed in his trademark black shirt and blue jeans, said Apple was staying aggressive and he appeared to mock rivals.

"We've built in Wi-Fi and we've made it usable," Jobs said, in an apparent dig at Microsoft Corp's Zune, which beat the iPod to market with a Wi-Fi player, but has not enjoyed the iPod's popularity.

Microsoft cut the price on the Zune by $50 to $199 on Wednesday.

"Nobody noticed," said Jupiter's Gartenberg.

Apple also said it had struck a deal with Starbucks Corp to let customers buy music from iTunes while they are at one of the chain's coffee shops.

Jobs made light of unrest among companies selling movies and songs on iTunes. High-profile partner NBC Universal has decided to pull TV shows from the iTunes Web site over pricing and in an interview Jobs said he hoped partners would return.

But during the event, as John Lennon's "Give Peace a Chance" blared in the background, Jobs quipped: "That's for when NBC calls."

(Additional reporting by Doris Frankel in Chicago, Franklin Paul in New York and Eric Auchard in San Francisco)