Shares of Apple ( AAPL) got a boost in early trading Wednesday as investors warmed to the launch of the firm's new "talking" iPod shuffle. The tech firm's shares rose $4.24, or 4.19%, to $93.05 by lunchtime, outpacing the tech sector's continued rally, which saw the Nasdaq rise 1.01%. The latest addition to Apple's iPod family is much smaller than earlier versions of the technology and speaks the names of songs and artists. Priced at $79, the new iPod has a capacity of 4-Gbytes, which is about 1,000 songs, and is described by Apple as being smaller than a AA battery. The first pictures of the new iPod highlight its diminutive size by showing it next to a standard door key. Despite an increasingly tough spending climate, the iPod continues to be popular with users, as evidenced by the company's recent first-quarter results. The Cupertino, Calif.-based firm shipped more than 22 million iPods during the quarter, compared with 11 million during the prior three months. Overseas markets, however, accounted for virtually all of this growth, with iPod unit sales in the U.S. contracting about 3% year over year. U.S. consumer research firm NPD even reported that iPod unit sales fell 14% year over year in January, although this may have been prompted by the impending launch of the new iPod shuffle. Apple is clearly looking to breathe new life into this part of its business with the latest addition to its product line. By expanding its iPod family, Apple will also give its iTunes business an important boost, notably its App Store for downloading games and other applications. Although the company does not break out specific figures for this part of its operation, Apple says that more than 500 million applications have been downloaded since the App Store was opened in July 2008.
Although still in its infancy, the App Store has already spawned imitators from Microsoft ( MSFT), smartphone rival Research In Motion ( RIMM) and a handful of other challengers. Analysts are even speculating that sales from Apple's App Store could reach a billion dollars by the end of 2009, according to the Apple Insider Web site. Set against this backdrop, the launch of a new iPod should help Apple sell yet more applications to gadget-obsessed consumers. Long term, opening up a billion-dollar revenue stream could only spell good news for the company, which recently posted first-quarter revenue of $10.17 billion. The iPod's importance to Apple was underlined by the firm's dogged pursuit of former IBM ( IBM) exec Mark Papermaster to head its iPod and iPhone engineering efforts, which resulted in a high-profile legal dispute. Apple, which competes with the likes of Hewlett Packard ( HPQ), Dell ( DELL) and Nokia ( NOK), is seen as one of the tech companies most likely to withstand the recession, but it is still subject to tightening IT spending. In addition to its iPod efforts, the notoriously secretive company has also been urged to make cheap iPhones and netbooks top priorities for 2009.