Apple Buffs Up iPod

Updated from 2:24 p.m. EDT

SAN FRANCISCO -- Not surprisingly, the rumor mill got it right.

Following a week of fevered speculation, Apple (AAPL) took the wraps off a new design for its omnipresent iPod music player at an event here Wednesday.

Talk of an update for the iPod line has buzzed for days through gadget-focused Web sites, Apple-centric blogs and the mainstream media. The resulting chatter identified most of the new features unveiled by Apple CEO Steve Jobs.

The latest version of the 6-year-old iPod refreshes every product in the line, including bringing the company's iPhone touchscreen technology to a new device, the iPod Touch, which will feature Wi-Fi and Web-browsing capabilities. The 8-gigabyte and 16-gigabyte models will sell for $299 and $399, respectively.

One thing not predicted by Apple-watchers, however, was the company's announecment that it would drop its 4-GB iPhone model and cut the price of its 8-GB device by $200 to $399.

Apple also has added a video display and new games to the company's iPod nano, while the company's original iPod "classic" model received a boost in storage, with the larger-capacity player now holding 160 GB of storage -- the equivalent of about 40,000 songs. It will retail for $350.

Jobs also announced a new ringtone feature for the company's iTunes music store, allowing users to custom-make ringtones from available songs for 99 cents each.

In a typical sell-the-news reaction on Apple product announcement days, the company's stock was recently off $4.75, or 3.3%, to $139.41.