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Apple Enables iPod Addictions

Apple (Nasdaq: AAPL  ) justified the rumor mills by announcing some new variations on iPod models today. Investors reacted favorably, but the news could easily make one wonder whether iPod mania is beginning to subside... or whether this is just the next step in Steve Jobs' aggressive campaign to hook audiophiles his company hasn't already roped in.

Today's new releases include an iPod Mini with increased battery power and the ability to play more songs (with 6 gigabytes going for $249); Apple lowered the price for the 4-gigabyte Mini to $199. In addition, the company released a cheaper iPod Photo, with a 30 GB model priced at $349, as compared with the old 40 GB model that cost $499. The 60 GB model now costs $449 as opposed to $599. Also, the company released a product that allows iPod Photo to connect directly to digital cameras, one of the features that many thought was too important to be lacking in the iPod Photo.

You can take away a lot of reactions to this. For example, is Apple getting a bit worried about some of its heavy-handed competitors? We recently explored a rival no less than Microsoft (Nasdaq: MSFT  ) giving stuff away for free in order to woo some customers. That's just one example. There are all kinds of rivals just dying to steal Apple's thunder, including Motley Fool Stock Advisor pick Dell (Nasdaq: DELL  ) , Napster (Nasdaq: NAPS  ) , and Sony (NYSE: SNE  ) .

Are its new iPod Shuffle and Mac Mini products not doing as well as expected? I just received my own iPod Shuffle (as my Foolish colleague Seth Jayson teased me, the Shuffle had me at hello), and the fact that I ordered one showed that even my own misgivings about the tiny, screenless music player melted away given Apple's clever marketing. Am I one of the few who drank the Apple-flavored Kool-Aid on that one? It remains to be seen.

On the other hand, it's also possible that Apple's simply shoring up its lead, offering more and more of the fanatically loved devices with more tempting features and prices in order to make sure it truly is an iPod Nation. (Recent stats showed that 11% of the American population owns either an iPod or another MP3 player. Apple likely wants to grab as much of the remainder as it possibly can.) With the whole lineup of iPod gadgets, there seems to be a price that's comfortable for just about anyone who's looking for a portable music player.

Although I've thought for ages that the success of the iPod and the subsequent reinvigoration of the Apple brand would do a lot to push Apple's computer products, its valuation continues to reach levels that should make investors think twice. (And of course, that's not helped by what my Foolish colleague -- and fellow Apple fan -- Tim Beyers called a recent "meaningless move").

Apple may be trying to take over the world, or at the very least, the world of music -- but there are many reasons for investors to step carefully, not least of which is the fact that the stock's currently trading at a P/E of 71. Some might argue that it's trading at only 36 times forward estimates, but recent Apple euphoria leaves no room for missteps, and investors should tread carefully.

For more on Apple, read the following Foolish content:

Talk about today's developments on our ever-busy Apple discussion board.

Alyce Lomax does not own shares of any of the companies mentioned. She's a little miffed that with the new pricing, she could have gotten an iPod Mini for just $50 more than what she paid for her iPod Shuffle.

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