Apple's Latest Bounty Can't Stop Selloff

SAN FRANCISCO -- Apple(AAPL) announced its next charge into solidifying and expanding its computer and digital media empires, introducing a much-awaited lightweight notebook and announcing a video rental service through its popular iTunes store.

But these new additions to Apple's arsenal, announced by CEO Steve Jobs at the company's annual Macworld Conference & Expo here, couldn't offset a sell-the-news reaction amid a broader market selloff; the stock was recently down $11.83, or 6.6%, to $166.95.

As the MacWorld Turns

The new notebook computer, Mac Air, is billed as the world's thinnest notebook, and can fit inside an envelope with its 13.3-inch widescreen display, a full-size keyboard, a built-in camera and a touch feature on its keypad.

The notebook sports an Intel(INTC) Core 2 Duo processor, a battery life of up to five hours, but no CD-DVD drive and is priced at $1799 and will start shipping in two weeks.

"This is perhaps the best notebook we have ever shipped," Apple CEO Steve Jobs told attendees during his keynote address.

Under the company's new video rental service, movies will cost $2.99 for library titles and $3.99 a movie for new releases. High-definition movie rentals will also be available through iTunes for a dollar more, said Jobs.

Users can also directly rent movies from iTunes through Apple TV. The company also knocked down the pricing of Apple TV to $229 from $299, even as existing Apple TV users will get a free software upgrade.

For movie rentals, users will have 30 days to keep a movie and a 24-hour window to finish a title they have started watching. But they can watch a movie as many times as they want during that 30-day period, said Jobs, and transfer the titles to another device in the middle, including to an iPod, iPhone or a PC.

Apple will have 1,000 films available through iTunes by February, but, in what could be a key for video rental rivals, new films won't be available until 30 days after their release on DVDs. However, in a late surprise almost all the major studios, including Touchstone, Miramax, MGM, New Line Cinema, Disney(DIS), Paramount, Universal and Sony Pictures, are participating in Apple's venture.

Apple TV Should Worry Netflix, Blockbuster

Jobs also announced the company has sold 4 million iPhones in the 200 days since the mobile phone went on sale -- an average of 20,000 a day.

In the third quarter, Apple gathered 19.5% of the smartphone market, compared with 39% by BlackBerry maker Research In Motion(RIMM), 9.8% by Palm(PALM) and 7.4% by Nokia(NOK), according to data from Gartner.

Apple said it has sold 4 billion songs and more than 125 million TV episodes on iTunes.

Other announcements included a note that Microsoft(MSFT) has started shipping the Office Mac 2008 software suite for Mac users.

Jobs also introduced a new product, Time Capsule, as a back-up appliance that allows Mac users to wirelessly backup their data. Time Capsule will be sold in two versions starting February, 500-gigabytes for $299 and 1 terabyte for $499.

Apple's latest operating system, Leopard, has sold more than 5 million copies in the three months since its release in October, and about 20% of users running the Mac OS X operating system, Leopard's predecessor, have upgraded to Leopard, said Jobs.

>To order reprints of this article, click here: Reprints