Will a Price Cut Make the iPod Touch Relevant Again?

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From a peak of nearly 55 million units sold in 2008, Apple Inc. (NASDAQ: AAPL) iPod sales have fallen by more than 50% to just over 26 million in the company’s 2013 fiscal year ended last September. Apple announced price cuts on its iPod Touch devices Thursday morning, lowering the cost by $30 to $199 for the 16-GB version, cutting the price by $50 to $249 for the 32-GB version and slicing $100 from the price for the 64-GB model to $299.

Revenue from iPod sales fell by more than 50% from March of 2013 to this past March as users migrate their music libraries to iPhones, iPads or the iCloud. The question for iPods is whether Apple is trying to make the device relevant to its revenues and profits again or if the company is looking to stop making the device that started Apple’s drive to becoming the most valuable tech company in the world.

iPod sales traditionally peak in the company’s first fiscal quarter, which begins in October and includes the holiday shopping season. Sales trail off dramatically after that and in the first quarter of 2014 even the peak of 6.05 million units sold was down more than 50% from sales in the first quarter of the prior year.

A price cut may help if the company can persuade buyers that its ability to use Skype makes up for its inability to make phone calls. At $199 for the lowest priced iPod, the price is about equal to an iPhone 5s with a contract. Hard to see how that makes the iPod a winner.

Apple shares traded down about 0.1% early Thursday afternoon, at $90.24 in a split-adjusted 52-week range of $55.55 to $95.05.

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