APPLE Computer is preparing to release a cut-price version of its popular iPod music player that would store about 250 songs and sell in the UK for under £100, technology analysts believe.

Apple shares have gained almost 8 per cent in the US this week after analysts raised their outlook for the company based on widespread expectations that the famously secretive company is developing a small iPod based on low-cost Flash memory.

Internet chat rooms devoted to Apple were yesterday jammed with speculation that the latest member of the best-selling iPod family would be unveiled next month, when Apple holds its annual expo in San Francisco.

The launch of an Apple iPod based on Flash would follow Sony’s recent unveiling of a new Network Walkman boasting 1 gigabyte (Gb) of Flash storage, intended to claw back Apple’s would-be lead in digital music players.

Apple has sold about 4 million iPods, which sell for between £170 and £359 depending on the version, but a new model would provide an entry level option for people who have so far been unable to afford one.

It would also hold about 1 Gb of memory, compared with 4Gb in the iPod Mini and up to 40Gb storage in the traditional iPod.

Bill Shope, an analyst at JP Morgan Chase, raised his sales and earnings estimates for Apple citing “holiday (sales) strength, our expectations for a new flash-based iPod, and accelerating Mac share gains.” Apple shares rose by 0.4 per cent to close at $63.28 in New York last night.