Apple announced Wednesday the first major overhaul of its popular iPod music digital players in nearly two years and slashed the price of its new iPhone.
CEO Steve Jobs unveiled a series of iPod upgrades - including more storage and bigger screens - but the showstopper was a new model dubbed the iPod Touch and fashioned after the iPhone.
Apple also announced a new version of its iTunes music store that will allow users to buy songs wirelessly.
In iPhone news, Jobs said Apple will discontinue one of the two models sold since late June. The remaining version, with 8 gigabytes of storage, will now sell for $399, or $200 less than before.
Jobs detailed these and other developments at an invitation-only press conference held in San Francisco.
The biggest news centered on Apple's iPod line. To date, the company has sold more than 100 million iPods, but sales have been drifting since last year's holiday shopping season and profit margins are shrinking.
Apple now sells four different types of iPod: the Touch, Shuffle, Nano and the original model, which Jobs christened the Classic on Wednesday.
A new version of the Classic comes with a full metal design and is thinner than its predecessor. A $249 version has 80 gigabytes of storage and 30 hours of audio. A slightly thicker model features 160 gigabytes of storage and will retail for $349.
"This boggles the mind," Jobs said. He noted that the original iPod could hold up to 1,000 songs. Today, an iPod can store 40,000 songs.
The new Nano, meanwhile, will have video and a larger, brighter screen with an interface similar to the iPhone. Apple will also bundle three games into the new Nano, including Sudoku from Electronic Arts.
The new Nano will feature two memory sizes: A 4-gigabyte model for $149 and an 8-gigabyte model for $199. It will be sold in black, red, silver, blue and green.
Jobs said the new Nanos should be in stores by this weekend.
As for the iPod Touch, Apple watchers had speculated for days that Apple would unveil an iPod similar to its new mobile phone. Though slimmer than the iPhone, the iPod Touch features a similar multitouch interface, built-in Wi-Fi and the Safari Internet browser.
Like the iPhone, the iPod Touch can play YouTube videos. It will retail for $299 or $399, depending on the memory installed.
One thing the iPod Touch can't do that the iPhone can: make or receive phone calls.
Jobs said Apple will begin shipping the iPod Touch this month.
Jobs also announced a new venture with Starbucks (Charts, Fortune 500) whereby iPod Touch users who visit one of the coffee house's outlets can download any song playing directly to their music player. They can also retrieve a list of the last 10 songs that the Starbucks store played.
Starbucks CEO Howard Schultz, who joined Jobs on stage, said the new service will begin rolling out in early October and will be available in 25 percent of the company's WiFi-enabled stores by next spring.
Wednesday's announcements come more than two months after Apple took on mobile phone giants Nokia and Motorola with the iPhone.
Jobs said the company is on track to sell one million iPhones by the end of September. Research firm iSuppli reported Tuesday that the iPhone outsold all other smartphones in July.
For all of Jobs' showmanship, however, investors were unimpressed. Apple shares closed Wednesday down 5.1 percent.
Business 2.0 executive editor Philip Elmer-DeWitt contributed to this article. Senior editor Jon Fortt blogged the Apple announcement in San Francisco.
You can find out more information about the new developments here.