Apple co-founder and chief executive Steve Jobs, announcing the new products at the Macworld show in San Francisco, also said Apple had sold 4.5 million units of the various models of its blockbuster iPod in the 2004 holiday quarter.

Apple has traditionally aimed for high-end markets both for its Mac computers and the iPod, eschewing discount models. But the company reversed that course in one fell swoop on Tuesday with the $99 "iPod shuffle" and the $499 "Mac mini".

The new products expand Apple's four-year-old "digital hub" and could broaden its market considerably, analysts said.

Discount models 

But rumour sites had anticipated the new products, and Apple shares fell nearly 4%.

"I think that the expectations were about as high as they could get for it," said Marc Pado, US market strategist at Cantor Fitzgerald & Co.

Jobs said Apple sold 4.5 million 
iPod models in the latest quarter 

The iPod sales were also in the range of Wall Street
expectations.

The iPod shuffle is shaped like a pack of gum with no display screen. The smaller one, with 512 megabytes of memory, holds about 120 songs and costs $99. The larger one holds 1 gigabyte, or about 240 songs, and costs $149.

The lack of a screen may discourage some consumers, but it
is too soon to tell, said Tim Bajarin, an analyst with Creative
Strategies. "It's designed for use with the PC and the assumption that people will use their personal computer to manage their music anyway," he said.

Market cornered

The new iPod falls into a category of music players that use flash memory chips like those found in digital cameras and some portable media players, rather than the hard drives used in current iPods.

Jobs said the iPod holds a 65% share of the entire
market for portable digital music players, up from only 31% a year earlier.

Given that sort of consumer support, Jobs said a number of car companies such as Mercedes-Benz USA, Volvo and Ferrari would integrate the iPod line into their car stereo systems.

Mac Mini

The Mac mini will come in $499 and $599 models, depending on processor speed and hard-drive size. Weighing less than 3 pounds and under 2 inches tall, the mini connects to televisions as well as PC monitors.

Financial analysts, alerted to the mini by rumour sites now being sued by Apple, have said it would appeal to iPod users on the Windows operating system.

"It's very clear that these were designed to make the Mac platform more accessible to a broader audience" 

Tim Bajarin,
Creative Strategies analyst

"It's very clear that these were designed to make the Mac platform more accessible to a broader audience," Bajarin said.
"They want to entice more people either to switch, or, which is even more intriguing, to convince traditional PC users to make the Mac the centre of their creative, digital work."

Some had doubted Apple, which has less than 5% of the worldwide PC market, would go the lower-end route.

"What we are doing is adding a product that reaches even more people," said Phil Schiller, Apple's head of worldwide marketing. "Consideration of the Mac is a lot higher than it has been in some time."

New software

Apple also unveiled iLife 05, its suite of software to manage music, create movies, DVDs and manage and edit digital
photographs; and iWork, which contains an updated version of
its Keynote presentation software; and a new word processing software program called Pages.

The news appeared to have gone over well, as Apple's online store was briefly unavailable after the news broke.

Shares of Apple fell $4.40, or 6.4% to close at $64.56 on the Nasdaq. The stock more than tripled in 2004.