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A maxiPrice for Apple's miniPod

By Alex Salkever Few doubt that Steve Jobs is a masterful salesman, and fewer still would begrudge him the lion's share of the credit for bailing out an ailing Apple Computer (AAPL) in 1997. But even Jobs is subject to fits of delusion from time to time. Apple's ill-fated Cube desktop computer is the prime example. The cute white PC in the shape of a small cube won design awards but failed to spark sales and has since been relegated to the role of novelty item on eBay.

Where did Apple stray with the Cube? Form failed to follow function. The box lacked expansion capability and didn't seem worth the sticker price. So despite slick come-ons from Cupertino, the Cube collapsed.

Macheads witnessed a Cube moment the other day at MacWorld San Francisco when Jobs trotted out the new iPod mini as a highlight of his much anticipated keynote speech. It's an iPod that comes in many bright, funky colors. The miniPod, as it's already being called, has far less capacity than the previous versions, but it costs about the same (only $50 less the previous lowest-price model). And it weighs just three ounces less than the heftier iPods.

SMALLER BUT WIMPIER. Less music in a device marginally smaller at about the same price. Get it? I didn't, and few others will, either. In fact, while I was watching Jobs give his spiel, my mind replayed the infamous scene from the cult classic mockumentary Spinal Tap where the dim rock band tries to explain that dials on their amplifiers go to 11 -- and that's what makes them louder. I was left with the same sense of befuddlement after watching Jobs show off the smaller but much wimpier miniPod.

That's too bad. The original iPod was a seminal product release for Apple, an ergonomic and design breakthrough of epic proportions that has turned into a cash cow for Jobs. Apple has sold 2 million iPods, and it's clearly the game's dominant player right now, with 31% of gross unit sales of MP3 players and 55% of that market's total revenue.

Even Jobs's Jedi-esque powers of reality dispersion can't alter the unfavorable math behind Apple's new offering. Here are the hard numbers. The new miniPod will cost $249. That's about $100 more than the rumor sites had posited. It will offer 4 gigabytes of capacity on its hard drive. By comparison, the entry-level iPod now costs $299 and has 15 gigabytes of disk space. The miniPod's cost per gigabyte is $62.50. In the entry-level iPod, it's about $20.

So Apple is asking customers to pay three times as much per gigabyte. I have one word for that. Ouch.

DIMINISHING RETURNS. "No, you don't understand," argue the Apple faithful. "The miniPod is almost 50% smaller in terms of total volume. It weighs half as much. And it's so much cooler. You can get it in five different colors! Dude!"

Fair enough. But I think Apple is starting to hit diminishing returns in this area. Anything that's 50% smaller than a pack of cards is verging on becoming simply too small for most people to reasonably keep track of. As for the lower total weight, the difference between 6 ounces and 3 ounces is about as noticeable as the difference in the weight of a foam coffee cup you're carrying that's half full rather than one-quarter full.

To its credit, Apple did add a slight twist to the ingenious iPod menu system that makes the miniPod even more manageable by putting the clickable control tabs under the navigation wheel. The slightly reduced size of the miniPod LCD display could make Baby Boomers with fading vision go blind but should be just fine for the young hipsters Apple is obviously targeting.

STREET CRED TEST. Indeed, the miniPod is likely to win some design awards and deservedly so -- just like the Cube. But shrinking the form factor and the capacity without a corresponding shrinkage in price will put Apple's fetish product street cred to the test. That could lead to disappointing sales.

I may be wrong but, Steve, did you say this one goes to 11? Salkever is Technology editor for BusinessWeek Online. Follow his Byte of the Apple column, only on BW Online

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