February 17, 2004 11:50 AM PST

Apple begins shipping iPod Mini

Apple Computer said Tuesday that it has started shipping its iPod Mini, adding that it has received more than 100,000 preorders for the tiny music player since it was announced last month.

The $249 iPod Mini, which uses a new generation of diminutive hard drive, includes 4GB of storage--enough for about 1,000 songs--and is about the size of a half-inch-high stack of business cards. Like the older, larger iPod, the new version will work with both Macintosh and Windows PCs.

"We're definitely excited by the response we've had from customers," iPod product manager Stan Ng said in an interview, referring to the orders individuals placed through Apple's Web site. Apple is still watching to make sure that the iPod Mini doesn't cannibalize sales from the original iPod, but Ng said that so far, it appears to be attracting a new audience.

"Does the iPod Mini take away from iPod sales?" Ng said. "What we've seen so far says it really doesn't."

Ng declined to quantify traditional iPod sales since the Mini's announcement, but he said, "It continues to be a very strong seller for us." The new player appears, anecdotally, to appeal more to young people and women than the original iPod. The device also appears to be more popular among the fitness crowd.

While some early orders are now shipping, Apple said the Mini, which comes in silver, gold, pink, blue or green, will show up in Apple stores and at authorized retailers at 6 p.m. Friday.

The iPod has given Apple a strong market share lead, an edge the company is looking to maintain with the Mini. As of November, the iPod had a 31 percent market share among all MP3 players sold and an even larger share of the hard drive-based music player market. The company sold a record 730,000 iPods last quarter.

At the same time, Apple is facing increased competition from a range of products, many including tiny hard drives similar to the iPods'. The Mini will also have to compete with devices that, though bulkier, cost the same or less and hold more music.

Cornice, which makes a hard drive that competes with the one the Mini uses, said Tuesday that its drive is powering several new devices, including the Wi-Fi-equipped Aireo from Soniqcast, Digitalway's MPIO HD200 and Nextway's NHD-150D. Cornice's drives are also used in devices from Digital Networks North America (makers of the Rio line), Creative Technology, RCA and iRiver.

Apple, meanwhile, is also trying to maintain the top spot in the online music download market, where the company claims a 70 percent market share with its iTunes Music Store, despite competition from Napster, MusicMatch and others.

Over the weekend, Apple started selling $15 prepaid music cards at Target. The cards are being sold both with the iPods in the electronics department as well as in the CD section, Apple said.

Tim Deal, a Technology Business Research analyst, praised Apple's move to offer the prepaid cards.

"This is another way for Apple to generate interest in the iPod," Deal said. "By placing gift cards on end caps in 1,200 Target stores, Apple will appeal to impulse shoppers, last-minute gift buyers and many who have yet to learn about the music store."

Deal also said the cards may appeal to those who are leery about using their credit card for online purchases.

Apple is also moving ahead with its Pepsi promotion, in which 100 million songs are being given away. Although most of the winning codes are in certain Pepsi and Diet Pepsi bottles, the soft-drink maker is also testing out putting the codes in cans as well as in fountain drinks and Slurpees sold at 7-Eleven.

 

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