Apple Cuts iPhone Price by $200, Introduces 'Best iPod Ever'; Shares Fall 5%

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Includes: AAPL, MSFT
by: Roy Mehta

Apple Inc. introduced its revamped iPod lineup to the public along with some additional surprises on Wednesday. The company lowered the price of its more expensive iPhone from $599 to $399, and will phase out the entry level model. CEO Steve Jobs introduced the new iPod Touch, which will come with touch screen capabilities similar to the iPhone. "It's incredibly impressive in terms of both technical innovation and what consumers are looking for," commented Avi Greengart, analyst at Current Analysis. "It's basically an iPhone for people with Verizon." The iPod Touch will cost $299 for the eight-gigabyte version, and $399 for the 16-gigabyte version. Investors were worried that the iPhone would take the limelight away from the iPod, but the new version should be able to hold its own. Jobs during the product launch called it, "the best iPod ever." The device also has Wi-Fi capabilities that will allow users to preview and download music without a computer from the new Wi-Fi iTunes, which will launch next week. The iPod Nano received a face lift with a wider screen and video game features. The 4-gigabyte version will be $149, and the 8-gigabyte version will be $199. The old iPod was renamed iPod Classic and will be available with twice the storage space. In addition, a new version of iTunes will be released, which will allow iPhone users to use songs as ringtones. One of Apple's rivals made news today as well; Microsoft announced it was slashing the price of the Zune, its digital media player, by $50 to $199 just hours before Apple's launch. An employee at Microsoft said the move had been planned "for months." Zune has thus far failed to make a dent in the iPod's dominant position in the digital media device market. Apple shares traded down 5.2% to $136.74 as investors took profits after the recent run-up before the launch; Microsoft was down 1.2% to $28.48.

Sources: Reuters, Bloomberg, Wall Street Journal
Commentary: iPhone Price Drop Is A Bad SignApple Selloff Creates Buy OpportunityQ&A with Jobs [USA Today] • How To Get $200 Back If You Just Got An iPhone [GigaOM] • Engadget
Stocks/ETFs to watch: AAPL, MSFT
Earnings call transcript: Apple F3Q07, Microsoft F4Q07 (Qtr End 6/30/07)
Related: iPod touch guided tour

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