Apple unleashes iPod Nano - and iTunes mobile

Apple yesterday unveiled a tiny new iPod that will replace the popular iPod Mini and a mobile phone capable of playing music downloaded from a computer running iTunes.

At an invitation-only event for journalists and others in San Francisco, Apple CEO Steve Jobs pulled the new iPod Nano from his front pocket and declared: "1,000 songs in your pocket and impossibly small."

The fully featured Nano, which is thinner than a pencil and roughly the size of a business card, uses flash memory rather than the small, spinning hard drives used in Minis.

The Nano replaces the Mini line, which is located in the middle of Apple's line-up - in size and price - between the diminutive Shuffle and the capacious iPod. The Mini is Apple's best selling version of the iPod, and Jobs predicted the Nano will be a worthy successor. It "will instantly become the highest volume and most popular version of the iPod", he said.

iPod Nano comes in black or white and in two sizes: the 4GB iPod Nano holds about 1,000 songs and the 2GB iPod Nano holds 500 songs. They cost $249 and $199, respectively, and will appear in some Apple stores beginning on Thursday.

The Mini line it replaces comes in four colours and in capacities of 4GB for $199 and 6GB for $249.

Jobs said: "iPod Nano is the biggest revolution since the original iPod.

"iPod Nano is a full-featured iPod in an impossibly small size, and it's going to change the rules for the entire portable music market."

The Nano features the same 30-pin dock connector as the iPod and iPod Mini, allowing it to work with a wide range of accessories, including home stereo speakers and car adapters.

JupiterResearch analyst Michael Gartenberg said the iPod Nano would be just as popular as the Mini.

"This is the kind of thing that Apple loves to do - make a product and then turn around and try to make it better," he said. "I think the Nano will be a big hit, especially with sports-minded individuals and younger consumers.

Extending the iPod/iTunes franchise into a new market, Apple and Motorola on Wednesday also unveiled the Rokr, a colour-screen mobile phone that can hold music downloaded from iTunes. The product had been expected since July 2004, when Apple and Motorola announced plans to collaborate on a music-capable phone.

Ralph de la Vega, chief operating officer at Cingular, which will be the exclusive US carrier of the phone, said: "Today the talk ends and the music begins."

The Rokr will be available this weekend in Cingular stores and even sooner online, priced at $249.99 with a two-year service agreement. It can only hold 100 songs, even if the consumer inserts a memory card larger than the 512MB card that ships with the phone. The Rokr has a colour display and features built-in stereo speakers, as well as stereo headphones that also serve as a mobile headset with a microphone.

The Rokr could help Apple crack a potentially vast new market - hundreds of millions of mobile phones are sold each year. In north America, Motorola is the largest handset maker and Cingular is the largest service provider.

As is the case with most Apple product announcements, the company employed star power to add to the glitz. Following Jobs' unveiling of the devices, rapper Kanye West took the stage to sing two songs. And making an appearance from London, via iChat, was Madonna, who touted her new album, as well as the just-announced availability of her vast library on iTunes.

iPod sales have propelled Apple into a leading market position, with a 53 per cent share of all digital-music players, according to a report released on Tuesday by Solutions Research Group. Sony and RCA tied for a distant second with nine per cent share each.

Apple's success has had a tremendous ripple effect on the digital-music player industry. D&M Holdings, which makes the Rio music player, said last month it is shuttering its portable digital-audio division, in part because of Apple's domination.

Despite Apple's steps into the mobile-phone music player space, analysts are mixed on its effect on the iPod generation.

Roger Kay, president and chief analyst with Endpoint Technologies Associates, said: "I see the move as largely defensive. A cell phone is not the optimal device for listening to music."

Kay noted that Apple should be concerned that other handset makers and network providers might try to bypass the need to work with Apple, given that mobile phones are already exceptionally popular and increasingly capable of playing music.

Gartner analysts estimate 780 million handsets will be sold this year alone with one billion mobile phones sold every year by 2009.

Other analysts, such as Tim Deal with Technology Business Research, said Apple's move into the mobile phone market is a natural evolution of not only its iPod strategy but its iTunes store as well.

Deal said: "The pervasiveness of cell phones in the world makes sense that there should be a relationship of these cell phones and iTunes."

Motorola is also banking on more sales of its handsets with Apple as a partner. Gartner ranks Motorola as the number two global seller of mobiles behind Nokia, which recently released its own N91 handset. Capable of playing music, the N91 has a colour screen, a camera and 4GB of storage, which can hold about 1,000 songs. Samsung's SGH i300 and Sony's Walkman W800 are also similar to Motorola's Rokr.

Motorola's iTunes phone also has significant market potential for Cingular. According to Solutions Research Group, 14 per cent of Cingular's customers have a digital music player. A larger proportion, 17 per cent of those surveyed, report that they want to buy one within 12 months, the report said.

Also on Wednesday, Apple announced an upgrade to the iTunes software. Available now, iTunes 5.0 has a more streamlined appearance and enhanced search capabilities.

Scott Ard writes for CNET News.com