Cube, Colors and Oblong Mouse Highlight This Year's Macworld

It's not every day that a new computer mouse moves thousands of people to applause. Macworld only happens once a year.

Apple's (AAPL) annual New York trade show kicked off Wednesday with a keynote address from CEO Steve Jobs. His presentation was met with the usual enthusiasm from the rabid Apple faithful, who greeted each new iMac color that was announced -- indigo, ruby, sage and snow -- with all the reserve of a college hockey crowd.

Product highlights included an oblong optical mouse that replaces the round device that many users have found awkward to operate, and a new line of Power Macs with dual-G4 processors. Jobs concluded his keynote by unveiling Apple's new desktop product, the Cube -- a G4-powered machine that's crammed, as its name suggests, into an 8-inch cube suspended in a clear plastic case.

Analysts were generally positive. "Apple did two things today," says David Bailey of Gerard Klauer Mattison, which hasn't done any underwriting for the company: "They hit a lower price point in the consumer segment with the iMac. And they addressed the need of high-end consumers with the G4 Cube, which provides people with a G4 processor and the ability to go to 17-inch or flat display without taking up much real estate on the desk."

Recent evidence suggests that consumers have been migrating back toward high-end products after last year's trend toward cheap or even free PCs. Low-end PC maker eMachines (EEEE) has seen its stock sink more than 60% from its high after issuing an earnings warning.

Apple plummeted 8% Wednesday in the wake of an earnings report Tuesday that showed sales growing 17% in the second quarter from the year-ago period. Investors were spooked by CFO Fred Anderson's admission that sales of the company's flagship iMac computer were "relatively flat." (TSC wrote a story Tuesday about the earnings.)

To Bailey, Wednesday's product announcements should take care of any sluggishness for Apple. "I think this will really reinvigorate sales of iMacs and Power Macs going forward," he says. (Bailey rates Apple a buy, his firm's highest rating.)

PC bears, for their part, were scoffing at that notion. "Steve Jobs did a great job with translucent colors," says Fred Hickey, editor of the High-Tech Strategist newsletter. "What do you do for an encore? This is probably one of the weakest bits of news out of a Macworld conference that I've seen. I don't see this driving any big demand." Hickey has no position in Apple.

"They've done a nice job upgrading the product line," he continues. "The poor Apple customers who hadn't seen any decent products for years on end were ravenous to buy, and did. But what's going to happen now?"

This week seems to have put the burden of proof on Apple.

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