Finally, the iPod has found its way back into the rumor mill with speculation of a second generation iPod touch in the works. Lehman Brothers’ Ben Reitzes observed in his recent report to clients that inventory of Apple’s 8GB and 16BG iPod touch appears significantly low at the online Apple store as well as retailer Best Buy. Many, including Reitzes, attribute this shortage to Apple’s recent launch of its back-to-school promotion, where Apple includes a free 8GB iPod touch to students who purchase a new Mac computer. Others suggest that the intentions behind the promotion, combined with lower than average inventory of the 16GB iPod at select retailers, signifies a possible iPod update as early as September.
With the idea of a new and improved iPod touch on the horizon, speculation is swirling regarding possible improvements. Will it follow in the footsteps of the iPhone and have added GPS, camera, faster Internet speeds and improved audio clarity? Or will Apple stick to a basic memory boost, form revamp and possible color options? Only time will tell. What we do know is that with Apple’s newest purchase of chip maker P.A. Semi, materials cost for the iPod will invariably be down, putting it in prime position for a price reduction. In order for the iPod to hold a candle to the iPhone a price reduction is necessary. Best stated by Reitzes, “We believe Apple will need to reposition the iPod touch product by September now that the iPhone acquisition price is lower. We expect the iPod touch to experience significant cannibalization from lower-priced iPhones.”
The way I see it, Apple has two choices. They either give the iPod a boost to include all the bells and whistles on the iPhone, (The price for similar sized iPod and iPhones could stand on the same platform as the iPod consumer would be avoiding the monthly carrier charge, able to keep their current phone but still have access to the Internet, GPS, iTunes, weather, iPod Applications, and calendar). Or, Apple could keep the iPod touch basic, recognize that as the industry moves towards more powerful handheld devices with more available features there is still a valuable market for the iPod touch (children, elderly, those who want it all) and as long as the two products are under the same roof, it is a win-win situation. Whatever is in store for the newest iPod touch, i know the public will be pleasantly surprised. With Apple opening it’s eyes to a slightly different business model, i.e. “providing for the masses”, and manufacturing more in-house hardware, the iPod is sure to drop in price, which makes everyone happy.
