Has iPod's hit parade stalled?

After years of cranking out hit iPod models, has Apple Computer hit a wall?

The company hasn't had a significant update to its product line this year, with the only change being the addition of a smaller-capacity 1GB iPod Nano in February.

"It's possible that we're at a point where the path to taking the next step is less clear and less straightforward, even for a company with the technology expertise and creativity of Apple," said IDC analyst Susan Kevorkian.

Other reasons could explain the radio silence out of Cupertino, Calif., Kevorkian said, including the fact that Apple has decided to phase out the PortalPlayer processor from its next-generation Nano and reports that the company has faced design challenges with the successor to its video iPod.

Whatever the reasons, the competition is moving forward. Microsoft has said it will have its first Zune-branded device--a hard drive-based player with built-in Wi-Fi--in time for the holidays. SanDisk this week announced an 8GB version of its Sansa player, offering a device with more storage than the Nano or any of its major flash memory-based rivals. And the cell phone industry, which has struggled to find a music-playing hit, may have finally produced a bona fide contender with LG's Chocolate.

But few expect Apple is resting on its laurels.

"I'm convinced they aren't just sitting there," said Gartner analyst Michael McGuire. Apple declined to comment on where it is headed, as is its custom. Such silence, McGuire said, makes it hard to know where Apple is headed.

While it's hard to predict with certainty what will show up in Apple's next digital music players, any number of features could be added, analysts say. One possibility, Kevorkian said, is digital radio. So-called HD Radio offers digital content but, unlike satellite radio, is freely available without a subscription. Plus, one of the things that has prevented the technology from becoming widespread is the lack of support from hardware devices. "HD Radio is a technology that could make a lot of sense in the context of iPod," she said.

Apple has also given some indications that it may be trying to find new ways of melding the iPod with the cell phone.

During the company's most recent conference call, Chief Financial Officer Peter Oppenheimer said that today's cell phones don't make the best music players. "But over time, that is likely to change," he said. "And we're not sitting around doing nothing."

'Imagination is the limit'
The cell phone market is important, analysts say, noting that some consumers may opt to carry only one device, while others will make use of their cell phone for listening to music, even while carrying an iPod or other player on other occasions.

"You have a class of device that has a very powerful media processor with a lot of memory, it's almost like having a PC in your hand," Francis Lee, president and CEO of touchpad maker Synaptics, said in a recent interview with CNET News.com. "What kinds of things can you do with those devices? Your imagination is the limit," he said.

Lee, whose company's technology has been used in the iPod's scroll wheel, declined to comment specifically on what might be next for the iPod, but he said that broadly speaking, music remains one of the most important applications for future handheld devices.

In any case, Kevorkian said that Apple may have missed an opportunity to follow up on its successes of last year, which included the Nano and video iPod. "Apple had so much momentum coming out of 2005," she said. "That was momentum they could have banked on by introducing new products in the first half of 2006." (It should be noted, of course, that Apple could conceivably introduce a new model before the holiday shopping season.)

Even without new models, the iPod has continued to reign supreme. Apple still boasts a 75 percent share of the U.S. retail market and is the world's best-selling MP3 player.

Gartner's McGuire says that while it's noteworthy that SanDisk has managed to come out with a larger-capacity player, people want to move music onto their device with ease, a feat that's come more easily for Apple, which controls both the iTunes software and the iPod player. "The integrated seamless experience is still their strong suit," he said. "That's still the challenge that a SanDisk or other hardware player faces."

Even Microsoft has indicated that it expects its Zune to take some time to put much of a dent in the iPod.

At its financial analysts' meeting last month, Microsoft said that it expects to spend hundreds of millions of dollars in the coming years to make Zune into a serious iPod challenger.

"It is something that is going to take time," said Robbie Bach, the former Xbox executive who now heads Microsoft's overall entertainment and devices unit.

The company hasn't said that much about the player, though last week it offered indirect confirmation that the first device will play videos by noting on one of its semi-official blogs that the product will come preloaded with music and video from record label EMI.

Microsoft's mere presence has wreaked havoc on the non-Apple part of the market, particularly since most of the serious iPod rivals are part of Microsoft's PlaysForSure alliance built around the Windows Media digital rights management technology.

Microsoft has given no indication that any Zune service will work with other players, or that services like Napster or Rhapsody will work with the Zune devices. The software maker has said it plans to continue supporting PlaysForSure, but the real question is how much marketing muscle it will put behind that effort.

"That's a big part of what I think SanDisk and every other hardware manufacturer has to be wondering," McGuire said. "What's going to happen when Zune hits the marketplace?"

IDC's Kevorkian said that the software maker may be waiting to see how well it does before deciding how much effort to continue to put into PlaysForSure.

"Microsoft is in a position where they can hedge their bets," she said, but added "if Zune is successful in the short or long term, we believe the Microsoft is going to de-emphasize (the) Windows Media technology."

CNET News.com's Tom Krazit contributed to this report.