Apple likely to create bigger iPod Touch instead of netbook, analyst says

Apple, pushing deeper into low-cost mobile computers, may release a larger version of its iPod Touch player next year, rather than creating a scaled-down MacBook netbook, said Piper Jaffray senior research analyst Gene Munster.

The bigger iPod Touch would take the form of a touch-screen tablet computer, with a price tag of $500 to $700, said Munster, who has followed digital media companies including Apple since 1995. He expects Apple to release the device in the first half of 2010.

Munster downplayed speculation on Thursday that Apple would use its laptop line as a springboard into netbooks — inexpensive portable computers that handle basic Internet functions.

Apple Chief Operating Officer Tim Cook, who has filled in for iconic CEO Steve Jobs during his medical leave this year, criticized netbooks in April for having "cramped keyboards" and "junky hardware." Apple does have some interesting ideas for small computers, Cook said at the time. Those remarks suggest that Apple may instead expand on its iPod Touch player, Munster said.

"Such a product would fill the existing gap in Apple's product line between the iPod Touch and the MacBook," said Munster, who recommends buying the shares. "A low-cost netbook would serve to cheapen the Mac brand."

The iPod Touch, which currently offers a 3.5-inch screen, starts at $229, while the lowest-priced MacBook sells for $999.

A tablet PC, which would surf the Web, play music and video, and display electronic books, could appeal to recession-wary consumers looking for an inexpensive personal computer, Munster said. Sales of netbooks, which generally sell for less than $500, will almost double this year, compared with a 12 percent drop for the PC market overall, according to technology marketing research firm Gartner.