Earlier this year I doubted Handheld Entertainment’s: ZVUE claim that it would price its next generation ZVUE 260 portable MP3/video player at $149. After all, competing flash-based players were already dropping towards the $100 price point, and below that for the value end of the spectrum.

As expected, Handheld was forced to drop the retail price below $100 in its initial release today, and had to include a 1GB flash card versus the 512MB card spec’d in February. Can ZVUE generate profits at these price levels? I highly doubt it, but we will see over the coming quarters.

Bottom line: I still think that ZVUE should give up its continuously unprofitable hardware business before it drags the company under, and try to salvage some value from its online properties.

DISCLOSURE: no position.