That's not the point
Yeah, I don't really by that. I'd like to see the market share of ipods in these "smaller and less developed countries." There is a growing trend of smartphones worldwide, all of them with the capability to store and play music. If anything, these ipod are now catering only to the younger generation.
In these "smaller and less developed countries" like Portugal, my home, only a few percentage of smartphone users go high-end or use contracts. Not only that, what a product can actually do is not as important as what it does great.
For those that only listen to pirated 64kbits/s "music" (justin bieber, pop stars, etc.,a 100 cheap android phone is more than enough.. I agree with you.
However, there is a market for a device like this one, done right. Look at amazon. They are far from perfect, but they have done one thing right:services.
Free itunes match for ipod (expecially the nano) is a killer feature. With this, Apple can put regular shuffle, nano and even classic users as (almost) certain new nano buyers, especially if they do not cheap design-wise and stop producing those older devices. 80 dollars, nice market, simpler line-up and direct profit + Itunes gets even stronger.
Am i wrong?