Year in review: Apple sings a new tune

It's the iPod, stupid.

Apple Computer, which rolled the dice three years ago with a hand-size MP3 player the size of a deck of cards, came up boxcars.

This year, Apple was largely doubling down on the bet it made in 2001. At Macworld Expo in January, Apple took the iPod and made it a mini.

Sales of the iPod rivaled those of the Mac for much of the year, before ultimately dwarfing those of the Mac in the October quarter, at least in number of units sold. Expectations for holiday sales grew into the millions as the iPod topped Christmas wish lists.

Apple also expanded its iTunes Music Store--first to England, Germany and France, then to most of the rest of Europe and eventually to Canada. Canadians had to wait, but they wound up paying barely half of what the Brits do for songs bought through iTunes.

Apple's iTunes store was so popular, the company found that even silence could sell for 99 cents. It was so popular that Jobs felt compelled to rebuff calls from RealNetworks and others to open things up. About the only thing Apple discovered it couldn't do right was give away music.

Even as Apple enjoyed the profitable sounds coming from its music efforts, the company didn't ignore the Mac.

The Panther operating system remained the top cat for 2004, though Apple did announce that it was expecting its baby Tiger to arrive next year, with enhanced search the main new trick. Apple also said the new cats may be a little slower in arriving after a recent spate of kittens.

Most notably on the hardware side, Apple unveiled a replacement for its desk-lamp iMac. The G5 iMac came a little later than Apple would have liked but won plaudits for its power and small size.

Although Apple shares struck a sour chord after the iMac delay, the stock hit new high notes during the second half of the year, topping $50 a share in October, soaring above $60 by November and flirting with $70 in December.

The only big jolt to the Mac world came in August, when Jobs announced that he had undergone surgery for pancreatic cancer. But, in typical Jobsian fashion, he used the e-mail he sent from his hospital room to plug the PowerBook and was back on the job by September.

Some concerns did emerge that Apple's success with the iPod and iTunes could prove fleeting unless the company partnered more. Apple did make some moves in that direction, allowing HP to sell a version of the iPod and crafting a deal with Motorola to include a slimmed-down version of iTunes on forthcoming cell phones.

--Ina Fried