Apple's Jobs Cuts Prices on IPod Touch Models to Woo Shoppers

Sept. 9  -- Apple Inc. Chief Executive Officer Steve Jobs introduced slimmer iPod media players and cut the price on the touch-screen model 23 percent, appealing to cost- conscious consumers before the holiday shopping season.

A sleeker version of the 8-gigabyte iPod Touch will sell for $229, compared with $299 before, Jobs said at an event today in San Francisco. The stock dropped 4 percent, the most in more than a month, after the changes failed to captivate some investors.

``There was nothing revolutionary,'' Andrew Silverberg, vice president and portfolio manager for Alger Large Cap Growth Fund, said in an interview from New York. ``The news is what people were expecting. We have seen these kinds of sell-offs before after other Apple events.'' The fund held almost 70,000 Apple shares as of July.

Jobs, 53, has relied on iPods to spur holiday demand in what is typically Apple's biggest period for sales. Cheaper models may help win over U.S. consumers, who have cut budgets to cope with rising oil and food prices. Piper Jaffray & Co. analyst Gene Munster said he expected a bigger price cut for the iPod Touch.

Jobs, clad in his trademark jeans and black turtleneck, also introduced iPod Nanos that offer twice the storage at the same price as existing models. He appeared slim as he touted the company's latest products.

He told cable network CNBC that he is healthy even though he ``could stand to gain 10 to 15 pounds,'' reporter Jim Goldman said. Some investors had speculated he might be ill again after he had a successful surgery to treat pancreatic cancer in 2004. Speculation surfaced again in June, when he appeared at the Apple developers' conference looking noticeably thinner.

Jobs's Look

``Just the fact that Steve Jobs was up there was a positive,'' said Munster, based in Minneapolis. ``His appearance was unchanged from June. Investors will want to see improvement. It doesn't change our belief that he will be CEO for the foreseeable future.''

Apple, based in Cupertino, California, fell $6.24 to $151.68 at 4 p.m. New York time in Nasdaq Stock Market trading, the biggest decline since July 28. They have dropped 23 percent this year.

Jobs also said shows from General Electric Co.'s NBC Universal will return to Apple's iTunes music store, and that the site will add high-definition television shows for $2.99. NBC Universal let its deal with iTunes expire last year.

A 16-gigabyte version of the iPod Touch, which uses the same color touch-screen as the iPhone, will sell for $299, compared with $399 at its introduction last year. A device with double that storage will cost $399.

The pricing and capacity changes signal Apple is ``being aggressive,'' marketing chief Philip Schiller said in an interview. Munster had expected the new price for the 8-gigabyte model to fall to $199, to match the cost of the new iPhone 3G.

iPhone Fix

Apple introduced the latest iPhone in July, priced at $199 for an 8-gigabyte model. The company plans to release a software update this week that should ease problems with dropped phone calls and application crashes, Jobs said.

The iPod accounted for 22 percent of Apple's sales last quarter, compared with about 42 percent during the 2007 holiday selling season. The Macintosh computer and iPhone handset make up most of the rest of sales.

Customers can now buy a Nano with 8 gigabytes of storage for $149 or a 16-gigabyte model for $199. The new Nanos are made from highly recyclable materials, making them Apple's cleanest models yet, Jobs said. Apple also plans to sell an iPod Classic with 120 gigabytes of storage for $249.

``We think we've got the best lineup we've ever had for this holiday season,'' Jobs said.

The iPod has more than 70 percent of the U.S. market for digital media players, Jobs said today. In the first half of 2008, SanDisk Corp.'s Sansa player had the No. 2 spot with 10 percent, according to the NPD Group Inc. in Port Washington, New York. Microsoft Corp., which yesterday announced an update to its Zune player, took 3 percent.

Analysts have predicted price cuts and new products since July, when Chief Financial Officer Peter Oppenheimer forecast lower gross margins this quarter than in the previous period. He cited back-to-school promotions and an unspecified ``future product transition.''

September 9, 2008 16:06 EDT