Apple responding to complaints the screen on its sleek, recently introduced iPod cracks too easily, said on Wednesday it will replace any defective units.
Also on Wednesday, Merrill Lynch analyst Richard Farmer lowered its rating on Apple Computer Inc. shares to "neutral" from "buy," citing possible revenue growth deceleration in coming months as comparisons become tougher.
"When everyone knows everything is going right for a company, sentiment is hard to improve," Farmer wrote in a note to clients.
Cupertino, California-based Apple introduced the nano with great fanfare three weeks ago and Chief Executive Steve Jobs expects it to become the best selling iPod. The nano replaced the iPod mini, which had been the best-selling iPod model.
Shares of Apple closed down $$2.36, or 4.4 percent, at $51.08 on Nasdaq. The stock, after more than tripling in 2004, is up another 66 percent so far this year, based on Tuesday's closing price, reports Reuters.
"Any user with a defective screen should contact Apple ... and we will replace it for free," the spokesman said. "It's not a design issue."
In its most recent quarter, Apple sold 6.2 million iPods and accounted for about a third - $US1.1 billion - of the company's overall revenue in the period.
Apple's move seemed to satisfy one user who had complained.
"I am very delighted to see Apple take this issue seriously," Matthew Peterson, an iPod nano owner who set up a web site to collect photos of damaged iPods, said on his site.
Apple introduced the iPod nano in two versions: a two- gigabyte model selling for $US199 and a four-gigabyte model for $US249.
Apple's iPod line commands roughly 75 per cent of the market for digital music players and provide one-third of Apple's total revenue, informs Herald Sun.