Apple rolls out a smaller iPod

SAN FRANCISCO — SAN FRANCISCO - Apple Computer has introduced a smaller, slightly less expensive version of its iPod digital music players for $249 and a more powerful $3,000 to $4,000 server computer based on its new G5 microprocessor.

The announcements were made last week by Steven P. Jobs, Apple's chief executive, on the opening day of the Macworld exhibition. They were less dramatic than the company's usual introductions aimed at wowing customers with innovative technologies and new product lines at this regularly scheduled event.


However, jobs gave every indication that Apple is solidifying its consumer strategy of selling easy-to-use software and hardware focused on digital music and video, as it strives to re-establish itself in the corporate world by aiming to create a more stylish alternative to dominant players like IBM, Sun, Dell and Hewlett-Packard.

The theme for the day was clearly digital music and music players. Since he returned in 1997 to revive the company he helped found two decades earlier, Jobs' marketing strategy has been to focus with intensity on a single product or technology at a time.


In his talk last week, Jobs invoked the 20th anniversary of the Macintosh computer, which Apple originally introduced with its rarely viewed but long remembered "1984" advertisement during the Super Bowl. The advertisement evoked George Orwell's novel, and featured a hammer thrower barging into a Big Brother setting, where she destroyed a large video screen. After a showing of the original, Jobs showed a new version in which the hammer thrower is carrying an iPod music player.

Jobs made much of Apple's strong market share in commercial music downloads and portable music players. He said the new iPod Mini family is aimed at its less expensive and less powerful competitors, which use solid-state flash memory - instead of the iPod's small hard disk - to store digital music.

"The iPod Mini is designed to go after the high end of the flash market," he said.

The Mini is the size of a business card, relies on a 4-gigabyte disk that holds about 1,000 songs and has a control screen and buttons that are similar to those on the existing iPod players. Current iPods are larger and, depending on the model, store 15 gigabytes to 40 gigabytes, enough to hold up to 10,000 songs. Unlike the current iPods, which come in white, the Mini is available in five colors.

Apple sold 730,000 iPods in the past quarter and 2 million since the product was introduced slightly more than two years ago. "It's the No. 1 MP3 player in the world," Jobs said.

How long Apple, which is based in Cupertino, Calif., will be able to maintain its newfound momentum is a question gripping the computer, consumer electronics and recording industries. Jobs said Apple has a 70 percent share of commercial music downloads and dominates the digital music player market, selling about 31 percent of all players and, because they are more expensive than competitive models, garnering about 55 percent of revenues.

Industry analysts said Apple is chalking up significant profits on the players it sells, which have been priced at $299 to $499.

"If you look at their numbers over time, they are doing extremely well," said Mike McGuire, research director for GartnerG2, an information technology market research firm. "IPod margins represent a significant part of Apple's profits for the past quarter."


But while the bottom line remains focused on the iPod, Jobs devoted much of his attention in a two-hour demonstration to previewing improvements in Apple's iLife software. Apple is adding a software music synthesizer called GarageBand to the $49 iLife, which includes iTunes, iPhoto, iDVD and iMusic.

"ILife '04 is like Microsoft Office for the rest of your life," he said. Apple has sold 30 million songs via its iTunes music store, Jobs said.

But when it comes to the corporate-server market, Jobs took a swipe at one of his Silicon Valley neighbor as he acknowledged that the company had a long way to go. "Saying Apple and server is a bit like saying Sun and client," he said. "It's not something you think of."