Will it be a flash memory iPod for under $200? Or a new Motorola cell phone that can play music from Apple's iTunes Music Store? What about a new, monitorless iMac for $500? Or its own line of office software?
With Apple Computer's top dog Steve Jobs set to take center stage today to kick off the Macworld Expo at Moscone Center, the rumor mill has been at a fever pitch among the Apple faithful on what new products he will introduce this time.
The show, which is expected to attract more than 32,000 visitors, has been the stage of choice for Jobs to make splashy announcements about new products.
A year ago, he unveiled the iPod Mini, the colorful smaller sibling of the sleek portable music player that has become a hot seller. Analysts say Apple is selling more of the $249, 4-gigabyte portable music players than the white iPods, which are more expensive but can store more.
Apple's success in digital music has been one of the biggest stories in Silicon Valley. IPod sales have been phenomenal, and analysts say Apple sold about 4-million units in the last three months of the year. Now, with the falling price of flash memory, it's conceivable that Apple would expand its line of iPods by adding a smaller player with less capacity at a lower price, analysts say.
"There's a lot of headroom or tail room, if you will, under $249," said Roger Kay, an analyst at the industry research firm IDC. "You first skim the cream, and you gradually move the price point downward to go after the mainstream."
But one of the key issues for Apple that's getting lost in the iPod noise is its bread-and-butter computer business, whose sales saw some growth last year but not in a spectacular fashion.
For example, in Apple's fiscal year 2004, which ended Sept. 25, the firm reported $8.3-billion in revenue, a 34 percent increase from the previous year. Of that total, computer sales represented nearly $5-billion, a 9 percent improvement over 2003.
IPod sales grew 277 percent to $1.3-billion. In short, although the iPod business has become a significant portion of Apple's bottom line, computer sales still represent the bulk of its revenue.
Joel Wagonfeld, an analyst at First Albany Capital, estimates iPod sales will represent roughly a third of overall revenue for Apple's just-completed first fiscal quarter. That's an impressive growth from just 12.4 percent a year ago.
But Wagonfeld doesn't see iPod's portion of Apple's overall revenue continuing to increase dramatically. This is one of the reasons analysts say it is possible Apple might announce a low-cost Macintosh, essentially an iMac that comes without a monitor. Although Apple offers a $799 eMac desktop computer that includes a 17-inch CRT monitor, other PC-makers such as Dell and Hewlett-Packard offer PCs at $500 or less.
In general, Jobs has balked at the idea of simply competing on price, whether for computers or for iPods. He has often used the BMW analogy, arguing that a company can be very profitable making expensive, luxury items. But the low-cost PC is a growing segment, and Apple doesn't really have a product to compete in that space, analysts said.
"Whether it's $499 or $599, it would be interesting. In fact, it would be quite a coup for Apple if they can do it," said Jason Snell, editor in chief of Macworld magazine. A computer at that price might convert more Windows PC users to Macintosh by allowing them to try an Apple computer at a much lower price, Snell said.
However, while the success of Apple's digital music business creates positive momentum, it also has to figure out a way to attain better growth rates with its computer business, Snell said.
"I'm sure Steve Jobs is more focused on music than Mac right now, because that's the thing that really gripped him, but it's still a computer company," Snell said.