Motorola iTune Foray Seen as Boost for Apple

Handset analyst Earl Lum of CIBC noted the latest cell phone partnership is likely to boost the cool quotient of Motorola phones, which have suffered from a lagging-edge reputation. The iTunes announcement "may strengthen the mid- to high-end platforms of Motorola relative to Nokias," he said in a note.

The announcement marks the latest in an escalating tug-of-war in the online music business. Earlier Monday, in news that could mark a partial setback for Apple, rival RealNetworks(RNWK Quote - Cramer on RNWK - Stock Picks) said it has developed software to let consumers play songs from its Rhapsody music store on Apple's iPods.

That was an unsettling turn of events for Apple, which has marketed the iPod as a proprietary device that only plays music from its own shop. Earlier this year the company rejected an overture from RealNetworks to transform the iPod into an "open" platform that could play music from rival stores.

Analysts said it's too early to gauge the takeaway from RealNetworks' new software offering. "Real could boost demand for the iPod but reduce music store sales," offered Milunovich, adding that he's waiting to see if Apple will sue Real. Others agreed that a lawsuit could be in the works.

In Tuesday trading, Apple shares were up 88 cents, or 2.8%, to $32.14. RealNetworks was up 18 cents, or 3.3%, to $5.71.