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Analyst: Apple music business to grow to more than $5 billion by \'06

One analyst expects Apple to nurture its music division into a $5 billion business by 2006 through expansion of its iTunes music technology to new devices.

Speaking to CBS Marketwatch, Steve Lidberg, of Pacific Crest Securities, said that a flash-memory music player, and new initiatives in 2005, should help Apple expand its music business to more than $5 billion by 2006.

\"We look for Apple to introduce a flash-based iPod and wireless accessories and new types of audio content to monetize [its] customer base,\" Lidberg said. He added that he expects 2005 to be a \"strong year\" for Apple to initiate new partnerships that will deliver iTunes to more devices.

According to industry estimates, between 55 percent and 60 percent of all digital music players sold are flash-based products. And with Apple having already captured about 40 percent of the digital-music player market that is based on hard drives, analysts tell CBS Marketwatch that they see Apple\'s current success with the iPod as a harbinger of things to come in the flash market.

The Apple Phone

Also this year, Apple is expected to debut a new breed of cell phone, which the company is jointly developing with Motorola Corporation. According to AppleInsider sources, the handset will feature flash memory, an embedded version of iTunes, and Bluetooth wireless connectivity.

Sources say the Bluetooth connectivity will act not only as a means for syncing music content with iTunes on Macs and PCs, but will also support wireless audio streaming to bluetooth headphones. Though it remains unclear if Apple will market its own brand iPod compatible Bluetooth headphones, one third party iPod developer is rumored to be developing a mystery product that will boast compatibility with the new Apple cell phone. This product is expected to debut in late January and ship by summer.

Like some SonyEricsson phones on the market, sources say the Apple phone will also be capable of tracking information and displaying real-time Caller ID info on an external computer display (connected to a Mac or PC with Bluetooth). Another feature will reportedly gather and transfer a user\'s most listened to songs from the computer to the Apple phone with a single click.

Apple has yet to say when it will officially launch and demo the new phone. Industry insiders expect the phone to debut in January, but not necessarily at next week\'s Macworld Expo. It\'s not expected that the phone will be immediately available upon its debut.