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Addressing a performance gap between Apple Computer Inc.’s server line and its desktop models, CEO Steve Jobs on Tuesday cut the ribbon on Macworld Expo San Francisco with a PowerPC G5 version of the company’s Xserve rack-mounted server.

Jobs also ushered in a new Mac OS X version of Microsoft Office and introduced a smaller version of its MP3 player as well as a new assortment of Apple-branded consumer software for Mac users.

Like the original PowerPC G4 model, the new version of the Xserve comes in a 1U form factor; it features single and dual 2.0GHz G5 processors, ECC memory, an optical drive, up to 750GB of storage, and an unlimited client license for Mac OS X.

A single-processor configuration is $2,999, a dual-processor model is $3,999, and a “compute node” costs $2,999. All the models will ship in February. Apple also updated the Xserve RAID system to support 3.5 terabytes of online storage, which Jobs said was a 30 percent increase. Users will be able to hook up to 16 set slices per Xserve RAID. The enhanced storage systems will range from $5,999 to $10,999, Jobs said.

Leading the charge of third-party announcements at the keynote event, Roz Ho, general manager of Microsoft’s Mac Business Unit, announced Mac Office 2004. The new Mac OS X-native version of the office suite will feature a new Word Notebook View, a page-layout view in Excel and a new set of project-management tools in Entourage.

Microsoft said the suite will be available in the spring; customers who purchase the current version before that will be able to upgrade free, Ho said.

Other third-party releases for Mac OS X announced at the event include a Mac OS X of the NetVault backup package from BakBone Software Inc.

Cupertino, Calif.-based Apple itself announced Version 2.0 of Final Cut Express, the company’s consumer video-editing package, available now for $299.

As predicted by Mac rumor sites, Jobs unveiled the iPod mini, a $249 MP3 player that packs 4GB of data. The new hardware is the size of a business card and half an inch thick; it includes the full iPod interface and accommodates FireWire and USB 2 interfaces. The anodized aluminum devices come in five colors and are compatible with Mac and Windows; they will be available in February in the United States and worldwide in April.

Meanwhile, Apple is upgrading its entry-level model from 10GB to 15GB of storage for the same price of $299.

Last quarter, Jobs said, Apple sold 730,000 iPods; the company sold its 2 millionth iPod in December. For October and November, he said, Apple was No. 1 for units and revenues in the MP3 market; Jobs predicted the company would widen its lead in December.

Next page: Variety is the spice of iLife.

On other consumer fronts, Jobs unveiled iLife ’04, a $49 version of Apple’s consumer software suite, which he presented as “Microsoft Office for the rest of your life.” The updated package includes an enhanced version of the company’s online iTunes service; an update to its iPhoto application that supports 25,000 photos, lets users organize photos by date and allows them to swap photos via Apple’s wireless Rendezvous technology; Version 4.0 of iMovie, which lets users trim clips directly within the timeline, features new titling options, lets users add clips via Apple’s iSight videoconferencing camera and simplifies sharing of movies via the company’s .Mac online service; Version 4.0 iDVD with new themes, enhanced slideshows and menus, encoding from Final Cut Pro, and support for two hours of content per industry-standard DVD.

In addition, iLife 4.0 features a new application: GarageBand, a consumer music-production tool. The application lets users digitally mix up to 64 tracks, play more than 50 software instruments via any USB or MIDI keyboard, use more than 1,000 professional loops included with the package, apply audio effects, and play a guitar via vintage or modern amplifier settings. Users can easily transfer their finished mixes to their iPod MP3 players. Jobs said more than half of American homes feature a current musician, so the new package taps a huge potential market.

iLife ’04 is slated to ship Jan. 16 and will be free with all new Macs. Apple will also sell a set of additional effects and a $99 MIDI keyboard.

iTunes is now the largest online music store in the world, Jobs said, with more than 500,000 songs. He announced a joint promotion with Pepsi in which buyers of the latter’s soft drinks can win 99-cent credits for free music downloads.

Jobs kicked off his presentation by hailing the 20th anniversary of the Mac, which the company launched in January 1984 with its now-legendary “1984” Super Bowl spot. “It’s hard if you weren’t there to remember how things were in 1984,” he told the crowd. “The Mac came out and changed everything. It was literally a decade ahead of everyone else.”

Jobs also hailed the move from the historical Mac OS to the Unix-based Mac OS X as the fastest platform transition in history. “Forty percent of the installed base has moved over to the new operating system in past three years,” he said.

Jobs said that while Apple has revamped Mac OS X four times in three years, Microsoft Corp.’s “Longhorn” release of Windows isn’t due until 2006. “Microsoft is copying us again,” Jobs said. “It feels great.”