Sony Corp (SNE) said on Thursday it is launching a Walkman digital music player capable of storing far more songs than Apple Computer Inc.'s (AAPL) market-leading iPod, while also undercutting iPod's price.

The Japanese consumer electronics maker said the 20-gigabyte device, which is its second hard-disk drive gadget aimed at unseating Apple and can store 13,000 songs, will be launched on July 10 in Japan, by mid-August in the United States and in September in Europe.

Dubbed the Network Walkman NW-HD1 (search), it marks a major upgrade to the legendary Walkman brand and the announcement comes on the 25th anniversary of the introduction of Sony's groundbreaking portable music player — July 1, 1979.

It is expected to sell for around 53,000 yen ($487) in Japan and less than $400 in the United States, Sony said, undercutting Apple's 40-gigabyte device, which sells for $499 and can hold up to 10,000 songs.

Sony said it packed more songs in a smaller storage space by using advanced compression technology.

"Sony has consistently changed the economics of the portable music player business," said Richard Dougherty, lead analyst with Envisioneering Group (search) of Seaford, New York. "But Apple has trumped it for the past 30 months."

Because Sony uses the same 20-gigabyte hard drives across many of its product lines, including computers, it stands to benefit from massive price discounts for buying these devices in volume.

"Prices could fall by as much as 50 percent in the next 12-18 months," Dougherty said.

Sony President Kunitake Ando (search) said at a reception to commemorate the 25th anniversary of the Walkman that he was determined to take the spotlight in the market for portable music players away from iPod.

"I don't know if we can take this market back in a year ... But this launch is our message that we will work hard to put an end to the dominance by just one company," Ando said.

Sony declined to comment on sales targets. It has sold 340 million units of the Walkman over the past 25 years, including CD- and MD-based models.

ONLINE MUSIC

The latest product joins the "Vaio pocket," a digital player Sony unveiled in Japan in May. The Vaio pocket has a similar storage capacity and also carries a 53,000 yen price tag.

Sony views a high-capacity, hard-drive player as a crucial addition to its range of products in boosting usage of its online music store Sony Connect. It is hoping the cachet of the Walkman name will help it close the gap on the iPod (search) and Apple's iTunes download service.

Since Apple launched iPod three years ago it has dominated the digital music player market, outselling all competitors by nearly a two-to-one margin. Apple has an even larger lead in downloads, selling over 85 million digital tracks.

"This very clearly completes the range for us," said Robert Ashcroft, senior vice president of Sony network services Europe, a division of Sony Electronics.

Ashcroft said Sony Connect was due to be launched in Europe next week, beginning with the French market. He said that with the NW-HD1, Sony now had over a dozen digital players compatible with Sony Connect.

Assembling a large installed base of consumers with digital music players is considered crucial to survival in the brutally competitive digital download market.

As with Sony's other players, the NW-HD1 plays songs in the company's proprietary ATRAC format (search) only, meaning it is not compatible with other online stores and cannot play tunes in the popular MP3 format.

Sony, well-regarded by gadget lovers for its design prowess, said the NW-HD1 will be the smallest 20-GB player on the market. It is slightly larger than a credit card and 12.6 mm thick — less than half an inch.

Sony said Toshiba Corp. developed the hard drives and the rest of the gadget was designed by Sony engineers.

The battery lasts 30 hours, at least three times longer than the iPod's — a selling point that Sony plans to play up in promoting the device.

The NW-HD1 also employs shock-resistant technology that protects the hard drive if is dropped.

"We couldn't come up with something using the Walkman brand until it survived the 1 meter (3 ft 3.37 in) drop test," said Ashcroft.

Shares in Sony closed up 1.22 percent at 4,160 yen, outperforming the benchmark Nikkei average, which rose 0.31 percent.