Apple shares fell just over 5 per cent following its introduction of its new range of iPods last night.

Partially driven by investors concerns that Apple's iPhone price cut may indicate weaker than anticipated sales of the mobile phone, most observers believe the fall in stock price was also the result of wider economic variables currently assaulting the investor community.

The background: Wall Street continues to shudder in response to predicted increases in lending rates and fear at the repercussions of the US subprime lending crisis, which threatens to engulf countries beyond the US and has already seen central banks pour money into lending banks in an attempt to delay financial doom.

Speaking to the Wall Street Journal, Apple CEO Steve Jobs dismissed the notion that iPhone sales aren't on target, indicating the $200 price cut is an attempt to make an aggressive play into the mobile handset market at the crucial Christmas shopping period.

"It's time to be as aggressive as we can be," said Jobs. "If we're not, then we have to wait another year for the next holiday season."

Jobs explained that iPhone sales remain on target to hit one million by the end of September even without a price cut, and explained that decreased production costs enabled the cut.

Piper Jaffray analyst Gene Munster isn't concerned. He said: "The bottom line: Apple is investing iPhone profit dollars over the next few quarters in order to be a legitimate player in the phone market. We think this is the right strategy."

"By reducing the pricing on the 2G version, it does provide them with the flexibility in the next few months to introduce a 3G model," said Oppenheimer analyst Lawrence Harris.

"Apple has always been aggressive with price cuts to keep the competition at bay," Shannon Cross of Cross Research told Reuters.

The price cuts and new models are also designed to see off impending attempts by Microsoft to take a slice of iPod's dominant marketshare, as Universal Music, NBC Universal, RealNetworks and others begin a fresh attempt at breaking Apple's hold on the digital media market, an analyst explained.

"Microsoft looks like it is entering Apple's territory in a larger way, which would lead to lower margins down the road in Apple products," said Tim Biggam at online brokerage Thinkorswim. "But the long-range impact of Microsoft on Apple products remains to be seen," he added.

"They have a very deep and complete lineup for the holiday at very aggressive price points that their competitors are going to have a hard time matching," said Jupiter Research analyst Michael Gartenberg, speaking to an "It's looking like another very strong holiday for Apple."

"This is the best lineup of consumer products Apple's ever had going into Christmas," said Tim Bajarin, an analyst with Creative Strategies.

The iPod touch has also drawn praise, as it offers many of the benefits of iPhone to users who are trapped into a relationship with a mobile network other than AT&T. Education customers are also likely to see value in the product.

"It's incredibly impressive in terms of both technical innovation and what consumers are looking for," said Avi Greengart of Current Analysis, speaking to SmartMoney. "It's basically an iPhone for people with Verizon." (High speed internet).

Apple's chameleon ability to change the battleground whenever competitors get to close to its market space also drew praise. "Every time the competition starts to zero in on Apple in the music player market, they move the target and change the rules of the game,” Gartner analyst Van Baker told ReportOnBusiness.

"They believe absolutely in eating their young; they're going to replace their products before they give the competition a chance to replace their products."

It's that ability which explains why Apple holds the number one slot in the market for digital devices, observed Yankee Group analyst Josh Martin.

“Apple really needed to innovate on their high-end device and people were waiting for a long time for a lot of those iPhone features to be incorporated into the iPod,” Martin said. “This was definitely an opportunity for Apple to reinvent what a digital audio player is … if you can even call it that any more."

Some analysts note that iPod touch still has space among its icon listings for the addition of new features in future.