Apple's Latest Audio Offensive

There was definitely a different energy at the Apple (AAPL

) product introduction on February 28. These events are typically held before thousands at San Francisco's Moscone Center, not the far smaller auditorium at Apple's headquarters in Cupertino, Calif. And Apple Chief Executive Steve Jobs just wasn't his usual virtuoso self.

There were no Jobs-picked tunes wafting in the air as journalists and analysts crowded in for the much-awaited event. Instead, Jobs just sauntered in from stage right and launched into his schtick. There were even slight gaffes in what's usually perfect choreography -- such as when Jobs forgot to lift the black cloth off Apple's new iPod Hi-Fi speaker system on cue.

HELLO, BONJOUR. Indeed, Apple's efforts to play down the significance of the event, which Jobs called "medium scale" importance, seem to have worked. The announcement of the iPod Hi-Fi and two new versions of the Mac mini PC -- the latest Macs to be outfitted with microprocessors from Intel (INTC

) -- had largely been anticipated, and Wall Street analysts didn't expect them to have any major near-term impact on Apple's fortunes. Indeed, the news failed to prevent a 3.5% drop in Apple's shares, to $68.50, during a very rough day on Wall Street.

But if these products aren't world-changers, they represent important steps in Apple's move into the digital living room. Maybe the most important new feature is the inclusion of Apple's Bonjour wireless networking technology in the Front Row software that will now come standard on the new iMac minis.

While Front Row lets Mac owners play music or view movies or photographs while sitting on the couch with the help of Apple's tiny remote, Bonjour lets them play content that is not only on their hard drives, but also on any other PCs in the house -- whether it's the desktop model with the huge hard drive in the den, or the laptop full of obscure tunes your neighbor brings by.

APPLE'S ONSLAUGHT. Ever since Jobs began talking about turning the Mac into "the hub of the digital lifestyle" in 2001, analysts have been waiting for Apple to employ its techno-stylings to revamp the decades-old entertainment center.

Who better to enable consumers to listen to music without racks of CDs, view photos without keeping dust-collecting photo albums, or watch movies (be they the home, or Hollywood variety) without VCR tapes, DVDs and the requisite herd of remote controls?

Apple has indeed stepped lightly, even as Microsoft (MSFT

) and partners dumped gazillions into creating products designed to do many of the same tasks. But Apple's latest devices leave no doubt whether Apple is on the attack -- or that the immediate target is home audio. For all the hoopla over the iPod and iTunes in the past four years, it's almost all been focused on how to listen to music through mediocre PC speakers or via earbuds -- but not in PC-less rooms of the house.

ONE SYSTEM, MANY ROOMS. Now, that's changing. "This will go down as the shot heard round the world for the home-audio business," says Tom Cullen, co-founder of Sonos, Inc., a startup that's been making digital home audio gear for the past few years. "Everyone at Bose, Denon, Harman has got to be wondering what this means for them."

And when it comes to home audio, there's lots of opportunity for innovation. Other than expensive offerings from little-known companies such as Sonos, the standard home stereo has not kept pace with changing usage patterns from digital music fans. For instance, most stereos still have little or no ability to create or use playlists or get online recommendations.

Indeed, the latest update of Apple's iTunes software gives users the ability to wirelessly stream music up to three different stereos or powered speakers, suggesting that it wants to create easy multi-room sound systems that few conventional stereo setups can match. "We've been kind of a lonely voice out there," says Sonos' Cullen.

"BEST DIGITAL BOOM-BOX." But with Apple pushing ahead, retailers will put pressure on these home audio players to get moving, he says hopefully. "We've been trying to reinvent the stereo since we were born, but little companies can't create new categories by themselves. We need someone with a bigger megaphone, so we're rooting for Apple."

No doubt, the iPod Hi-Fi won't be for everyone. Analysts say it will surely present a huge headache for existing makers of iPod speaker systems, such as Bose and Altec Lansing. At $350, it's a natural for college students, and many iPod owners may want it to listen to their iTunes collections in the kitchen or on the back deck.

Still, Jobs' claim that it offers consumers a great way to replace their stereos is a stretch. Many people who listened to the product at the event praised its ability to fill a room with sound without distortion, but failed to hear the brilliant sound quality that led Jobs to ditch his own stereo. "If he'd just said this is the best digital boom-box ever, I'd have said he's right on," says Ernie Rideout, editor of an audio-oriented Keyboard magazine. "But I didn't hear the clarity and separation [of instruments and voices] that you'd expect from a product that was ready to do battle with the home stereo."

HOMEGROWN. If Jobs really has really tossed a stereo set-up that only a billionaire could afford, jokes Gartner Group analyst Mike McGuire, "I'd like to go check it out and ask, 'How much for the speakers, dude?'"

But then again, this is just Apple's first shot at an audio-hardware product, and Apple most likely learned a great deal about acoustical engineering and speaker design in the process. Asked if Apple had relied on outside companies for any of the product development, iPod division chief Jon Rubinstein said it was "designed entirely by Apple." (Rubinstein, Apple's longtime hardware engineering head, says this was his final project before his previously announced retirement.)

And Apple seems serious about hitting true "hi-fi" quality, says Cullen of Sonos. "You can tell from the product specs," which show that the iPod Hi-Fi is designed to hit frequencies from 53 hertz on the base side to highs of 16 kilohertz. That's not the 20 hertz to 20 kilohertz demanded by the most discriminating listeners, but it's close. "No audiophile would buy a product that isn't '20-to-20'," says Cullen. "But Apple had to make trade-offs to create a boombox-style product, and they made good ones."

MICROSOFT'S CHALLENGE. Indeed, most analysts expect Apple's new products to keep the company's momentum heading in the right direction. They'll likely be relatively hot sellers on their own, and will be one more reason for consumers to stop into their local Apple retail store. And even if the new Mac minis and the iPod Hi-Fi don't immediately conquer the living room, Apple's loyal customers will surely use their capabilities to weave Apple's various technologies even deeper into their lives.

All that may not be a big deal right now, but it's ultimately bad news for rivals such as Microsoft that want to knock Apple off its perch in digital music. And it will have a lasting impact on the raft of new home electronics players that will have to contend with -- as well as partner with -- Jobs & Co. in the years to come.