Apple shocked Wall Street this afternoon when the company announced that it was slashing the price of its 8-gigabyte iPhone to $399 from $599 while phasing out the 4-gigabyte model. This news came as Apple unveiled a revamped iPod line-up that met its typically high expectations. Apple's iPod Touch, which uses the iPhone's touch-screen capability, was centerpiece of the company's new iPod family. The device will sell for $299 for the 8-gigabyte version, and $399 for a 16-gigabyte version. It also features the ability to connect to Wi-Fi Internet hotspots and a full Internet browser. To complement the new device, Apple unveiled an iTunes Wi-Fi music store.

Apple also unveiled a new version of the Nano, which CEO Steve Jobs said was the most popular music player in history. The new Nano is wider to accommodate a 2-inch video screen and metal design. A 4-gigabyte Nano is $149, while the 8-gigabyte version is $199. The video iPod has been renamed iPod Classic and will come with double the memory. The low-end Shuffle product, meanwhile, will come with additional colors.

This news follows Microsoft's decision to trim the price of its own digital music player, the Zune, by $50 to $199.

The shares of AAPL dropped more than 5% this afternoon following the news of the iPhone price cut. The security is currently hovering close to support at its 10-day and 10-week moving averages at the 135 level. In addition, the stock's 20-week moving average rests at the 125 level and could offer another layer of support. AAPL has been guided higher by its 10-week and 20-week trendlines since July 2006.