Apple's new 1GB Nano

Apple Computer Inc. cut the price of its cheapest digital music player, the iPod Shuffle, and launched a smaller-capacity version of its mid-priced iPod Nano.

The move by Apple, which has 70 percent of the U.S. digital music player market, is aimed at further consolidating a market that it leads, Apple executives said. The company also said it has now sold 12 million videos on its iTunes online store.

Apple has already sold more than 40 million iPods since their introduction in October 2001, and, in 2005 alone, sold more than 30 million of the popular items.

The price cuts could raise questions about whether Apple's profit margins will suffer, but American Technology Research analyst Shaw Wu said he was not concerned.

"The price of components have come down more than 70 percent, especially flash memory for the Shuffle," he said. "And the price of the Shuffle hadn't changed, so they were making a ton of profit off the Shuffle. So they're passing some of those savings on."

Asked whether Apple needed to cut prices for products that were already so popular, Wu said, "While iPods have a 70 percent share in the U.S., internationally its share is much lower at around 40 percent."

Cupertino, California-based Apple said the 512-megabyte Shuffle will now sell for $69, down from $99 previously. The 1-gigabyte model will sell for $99, down from $129.

The 512-megabyte version holds about 120 songs.

The new 1-gigabyte Nano, the sleek iPod model that won rave reviews from critics and consumers when it was introduced last September, was priced at $149.

The 2-gigabyte Nano sells for $199 and holds about 500 songs; a 4-gigabyte model sells for $249.