iPod price cuts?
We believe that Apple will announce an a complete revamp of the iPod pricing structure.  Our analysis leads us to an expectation of at least a 10 percent price reduction across the iPod line.  We expect that the iPod touch will see a larger reduction (perhaps as high as 33 percent) to prevent the iPhone from eating into iPod touch sales.  If this occurs, you can expect to see the entry level iPod touch fall to between $229 to $199 from the current $299 price.

A key metric for Apple in the eyes of investors is iPod unit growth.  During fiscal year 2007, iPod unit sales increased 31% compared to 2006.  During fiscal year 2006, iPod unit sales increased 75% compared to 2005.  Apple will need to transition the pricing structure to keep year-over-year iPod unit growth strong and we believe that the only way to do this is to include new features while simultaneously reducing prices.  This will drive down margins moving forward but we feel that the move is necessary for Apple to maintain their market share lead.  Such action will serve as a strategic move ahead of the holiday season.

Prior iPod updates in September
September 5, 2007

• Apple OVERHAULS ENTIRE iPod line - new iPod touch - new iTunes Wi-Fi Music Store - iPhone Ringtones - iPhone price slash

September 12, 2006

• Apple Revamps iPod Line - iTunes 7 - Movies Added - Announces Future Set Top Box

September 7, 2005

• Apple Announces the iPod Nano and iTunes Phone