Apple Unveils Low-Cost Mac, Tiny IPod

By: AP
By: AP

SAN FRANCISCO - Seeking to make inroads against lower-cost competitors, Apple Computer Inc. introduced a cut-rate computer the size of a paperback and a tiny iPod that starts at $99 but holds far fewer songs than the company's hard drive-based music players.

The new products were introduced Tuesday by Apple CEO Steve Jobs at Macworld Expo.

The Mac mini computers go on sale Jan. 22 and represent Apple's first foray into the budget desktop PC arena, which has been largely confined to personal computers that rely on Microsoft Corp.'s Windows operating system.

Smaller than even some standalone external computer drives, they lack a monitor, mouse and keyboard. The 40-gigabyte Mac mini will cost $499, an 80-gigabyte model $599.

They'll ship with Apple's latest operating system, Mac OS X (news - web sites) Panther, as well as the newest version of its iLife suite of digital media software programs, also unveiled Tuesday.

"People who are thinking of switching will have no more excuses," Jobs said. "It's the newest and most affordable Mac ever."

Apple has just a 3 percent share of the U.S. computer market, and company executives say they're aiming with the Mac mini to woo PC users who may have felt Apple products were too high-priced.

"This is also a great second or third computer in the home," said Jon Rubenstein, an Apple senior vice president.

The iPod shuffle, on the other hand, seeks to build on Apple's heady success in the portable music business while appealing to people seeking flash memory-based players, which are more durable and lightweight than those using hard drives for storage — and thus better suited as exercise partners. The shuffle is smaller than most packs of chewing gum, weighs less than an ounce and is a third of an inch thick.
Unlike its larger cousin, the iPod mini, the shuffle lacks a display. There's a scroll wheel for the controls so stored songs can either be played sequentially or automatically shuffled in random order. Apple is selling two versions of the iPod shuffle.

The smallest-capacity model will have 512 megabytes of storage, which holds up to 120 songs, and costs $99. A one-gigabyte version, which holds up to 240 songs, will sell for $149.

Until Tuesday, the lowest cost iPod was the mini, which costs $249 for four gigabytes — enough to store about 1,000 songs.

Like other iPod models, the new players are designed not to play songs purchased from online music stores that compete with Apple's iTunes.

The iPod has helped infuse new life into Apple.

In the past year, the Cupertino-based company's stock has tripled on strong sales of the iPod, which is emerging as one of the 21st century's first cultural icons.

Jobs said Apple sold 4.5 million iPods in the fourth quarter and more than 10 million since its debut in October 2001. He said Apple holds 65 percent of the hard drive-based portable music player market but just under a third of the total market.

Analysts expect the new iPods will help Apple hold its lead in the MP3 market.

Because many rival flash-based players have just 256 megabytes of storage, Apple is "sticking to its cut-above position," said Susan Kevorkian, an industry analyst with IDC. "There are plenty of people who want an iPod but haven't been able to afford the $249 Mini, so offering these lower-priced players allows Apple to attract not just new users but those who already own an iPod but want an even smaller version."

Investors seemed unimpressed.

Apple shares fell nearly 6 percent Tuesday on the Nasdaq Stock Market.

Analysts were expecting about 4.5 million iPods to be sold in the fourth quarter — so the fact that the company didn't outperform expectations disappointed Wall Street.

"Apple suffers a lot because the expectations for the company around their announcements are so high," said Shannon Cross, a financial analyst at Short Hills, N.J.-based Cross Research. "With Apple more than others, it's always buy on rumor sell on news. It's impossible for them to meet everyone's expectations."

The stock may have also taken a hit because of the Mac mini, the company's new, $499 computer. Profit per machine is likely to be lower on the bare-bones mini.

Cross estimated the profit margin to be as high as 19 percent. More expensive Macs have profit margins of 25 percent or higher.

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