The fabless chip maker, which lost a major chuck of business in Apple Computer Inc.’s iPod nano product line, is still the odds on favorite to win the socket in the next-generation video iPod, according to Craig Berger, an analyst with Wedbush Morgan Securities.

Still, there’s good and bad news for PortalPlayer. “We continue to believe PortalPlayer will retain its socket in the soon-to-be-released video iPod given Apple’s design constraints,” Berger said in a report on Tuesday (May 2).

“While we maintain our thesis that the Video iPod will remain a two-chip solution in 2006, we are removing these units from our PortalPlayer revenue forecast in light of Apple’s apparent ability to switch chip vendors at will,” he said.

As reported, Korea’s Samsung Electronics Co. Ltd. won the next-generation, iPod nano chip business at Apple — at the expense of PortalPlayer.

PortalPlayer supplies the media processor chip for the current iPod nano line. PortalPlayer’s media processor chip is still used in Apple’s current video iPod line.

But Apple’s next-generation video iPod socket is said to be up for grabs. Broadcom, PortalPlayer and Samsung are said to be competing for the next-generation, video iPod socket. In other words, Samsung did not win the entire iPod business at Apple — at least for now.

On Monday (May 1), PortalPlayer posted disappointing results, but the company vowed to regain the lost iPod chip business at Apple.