Nano

Having recently bought an iPod, which is the smallest of all of them, called the shuffle, but also has the least functionality, I was interested to see what Apple was going to do next. They had a big presentation on Wednesday, showcasing not only the new iPhone, but also a brand new iPod. It's called the iPod nano and it is really cool.

It's slim and light, and has a liquid crystal display. It's a marvel really, of design and ingenuity. One can't help looking at it and seeing the word 'blockbuster' dancing over it. The mini has been the most popular MP3 player in the world, and what Apple is doing is very bold. They are allowing a brand leader, their own product, to be overhauled by rolling out another product. The idea is possibly to control leadership of this category, and not allow competitors to dictate better replacements.

1000 songs in your pocket for $249. Or 500 for $199.

Jobs taking calculated risk with 'nano'
By John Shinal

SAN FRANCISCO (MarketWatch) -- Apple Computer Inc. Chief Executive Steve Jobs, ever the showman, kept his most important product move a secret until Wednesday, when he brought the house down with a little help from Madonna and Harry Potter.

The question now, though, is whether Jobs can pull off his bold plan to shake up the company's fastest-growing and most popular product line.
With Wall Street analysts and the media still digesting the details of Apple's iPod-equipped cell phone, Jobs stunned the crowd at San Francisco's Moscone Center when he revealed that the company planned to replace its most popular iPod with a new product just a fraction of its size.

Slimming effect

The iPod nano, "thinner than a No. 2 pencil," as Jobs described it, is no doubt a marvel of product design that will likely have broad consumer appeal.
Yet because it uses newer, more expensive components than the iPod mini it will replace, the device will be less profitable per unit for Apple.

By rolling out the iPod nano, Jobs is betting that he can simultaneously increase the size of the market for digital music players and grab a larger share of it.
"The marketplace will ultimately decide" the wisdom of Apple's latest moves, said Neil Strother, an analyst with the research firm NPD Group.

For Apple, the stakes couldn't be higher, as the iPod line comprises Apple's fastest-selling products by far and now contributes about a third of the company's revenue.
At least one analyst thinks Apple's dominance of the digital music market-- which will only be helped by new, exclusive content deals with Madonna and the Harry Potter series author J.K. Rowling -- will be enough to ensure the Nano's success, he said.
"This is going to be a pretty hot product," said analyst Gene Munster of Piper Jaffray, who rates Apple shares outperform. "It could be Apple's next home run."

Marvel vs. margins

The Nano is less than a quarter of the size of the original iPod, first sold in 2001. Apple accomplished that engineering feat by completely eliminating the the hard disk drive that was used to store data on earlier iPods.
Instead, Apple is using what's called flash memory technology from Samsung Electronics.

While that's made the product small enough to fit into the tiny change pocket stitched into the front of a pair of Levi's, it also has boosted Apple's component costs by as much as 50%, according to Munster.
Apple is selling two versions of the iPod nano, one that holds 2 gigabytes of data -- enough room for about 500 songs -- for $199 and a 4-gigabyte model for $249. Given the component costs, "it's hard to see how they make any money on the 4-gigabyte version," said Munster.

Apple is likely betting that component prices will come down and that it can make up the difference on volume.
"This," the analyst said, "is a way to grab market share."

John Shinal is a technology editor for MarketWatch in San Francisco.