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New iPods may face delays - analyst

Shares of Apple Computer fell over 2 percent in early morning trading after one Wall Street analyst said new versions of the company's iPod nano and video iPod players may be delayed by a much as six months.

"We previously believed that new nanos and the widescreen video iPod could ship in Q3 and Q4, respectively," American Technology Research analyst Shaw Wu told clients in a research note. "However, we now believe that both could be delayed by a quarter or two."

Wu now sees a new iPod nano arriving during the December quarter rather than the September quarter. The analyst attributes the delay to Apple's change of SOC (system-on-a-chip) suppliers, in which it elected to use chips from Samsung rather than long-time iPod component supplier PortalPlayer.

"We believe the price points will remain the same at $199 and $249, but that storage capacities will be doubled to 4GB and 8GB, up from 2GB and 4GB," Wu wrote. He made no comment on plans for Apple's 1GB iPod nano offering.

Meanwhile, the analyst said issues surrounding battery life continue to be the "key gating technical factor" that could delay the launch of the much-rumored widescreen video iPod until the first half of 2007.

"Apple is aiming to increase both the screen size and improve the battery life —two conflicting attributes that are difficult to improve simultaneously and require significant engineering," he wrote. "Depending on how much progress is made, we are picking up that wireless Bluetooth headphones may or may not be included with this next-generation vPod."

Wu said Apple has been experimenting with several different methods to reduce battery consumption, including the use of better battery management software, a bigger battery, and both NAND flash and microdrives. The analyst maintains that when the player does hit the market, it will be a high-end compliment to the company's current video iPod line and not a replacement.

"While it may sound counterintuitive, a positive side effect of these product delays could mean better spacing of iPods in 2007," he said. "With the original nano and vPod released a month apart in late 2005, it created a very strong December quarter but exhausted Apple's iPod pipeline for 2006."

Wu retains a Buy rating on shares of Apple but reduced his price target from $101 to $75 to "reflect the equity market's lower trading multiple."