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Piper Jaffray analyst and long-term Apple watcher, Gene Munster, says Apple must act to stem the decline in iPod sales. Munster claims the last quarter of iPod sales showed the lowest growth rate in the history of the device, mirroring an industry-wide slowdown in MP3 player sales.

Munster predicts that Apple will see growth of around 15% in the iPod market through to 2009, but that the company needs to pull the stops out to achieve these figures. "In order to achieve this level of year-over-year iPod growth, we are expecting Apple to introduce cheaper, innovative iPods with Wi-Fi and multi-touch

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technology," Munster says.

"Whereas the iPod classic simply enables users to listen to audio and watch video (with some remedial calendar and contacts applications), we believe that internet connectivity opens the iPod to an entirely new set of possibilities," he claims. "For starters, as we have seen with the iPod touch and the iPhone, email, full-featured web browsing, a mobile iTunes Store, YouTube, and Google Maps are all possible on an iPod."

One of those "new possibilities" includes turning the iPod into a virtual coffee machine. "If for example you are on your way to Starbucks, you could wirelessly order your drink from your iPod, pay for it using your iTunes account or the attached credit card, and pick it up without ever standing in line or waiting at a cash register," he predicts.

"These features (and possible features) make the iPod touch more of a mobile computing device than a simple iPod."

"We believe Apple is developing such solutions that will enable the company to deliver lower cost, Wi-Fi connected iPods in the near future," he adds. "In turn, this new iPod platform should generate continued growth for the iPod segment of Apple's business."