Steve Jobs on the iPod Shuffle and Mac Mini

And fresh from his keynote address at the Macworld conference. We bring you a first on CNBC interview with Apple, computer CEO Steve Jobs. He joins us now live in San Francisco. Mister Jobs, welcome. It's always great to have you on CNBC. It's great to be here. Tell us a little bit about this flash memory. What is it called? The iPod shuffle, which is the latest in your family of, of iPods. I mean, practically every kid in my my son's class, including my son, got one for Christmas. That's great. Well, we've got something new, that's even more affordable. This is the new iPod Shuffle. It's about the size of a pack of gum, and it weighs less than an ounce. And, it's pretty amazing. It holds either... There's one model that holds about a 120 songs and another that holds 240 songs.

And, it even comes with a lanyard, so you can take off the cap on the bottom and just plug it right in here and wear it around your neck and plug the headphones in. And... And so it works basically the same way as the iPod does, but it has a lower price point, holds a few... So holds less fewer songs. Right? It holds fewer songs and it has a price point of just $99 for the 120 song model, but it works a little differently. The... There's an explosive phenomenon in the iPod marketplace in the last year, which is people started to listen to their songs by turning on shuffle and letting the iPod shuffle up the next song. Well, the iPod shuffle is built around that concept. So you load in your 120 songs or 240 songs, and it will just shuffle up the next one. So you don't have to look at a teeny weeny little display, and you don't have to fumble around to try to find your next song.

It just shuffles up the next song for you, and it's it's really fantastic. So I guess, mister Jobs, based on the success of the iPod, you're learning new things when you learn that people were using the shuffle function, and that was, one of the basis for this new product. Let me ask you about about the battery. And I only ask because I know that in the past, there was some concern about the iPod battery that it wasn't as strong as some would have liked. I have my own anecdotal story, actually. My iPod stopped working on me, and and I wasn't sure if that was my battery or if it was just a one time thing. Did you learn anything about the battery, and where does that issue stand? Well, you know, we had some we had some issues with batteries about a year and a half to two years ago, and I think those have been pretty much resolved. But if you have a problem, let me know, we'll take care of it. Tell me about the 499, the the new computer that you also introduced today.

Well, you know, we've gotten a lot of, requests from customers to give them a Mac that's more affordable. And to to, you know, give them a Mac without a display and without a keyboard and a mouse because a lot of a lot of people have a display hanging around. A lot of people have a keyboard and mouse. And so we took that input and we came up with what we call the Mac mini. And we called it the Mac mini just because the iPod mini has been so successful and it's a more, you know, smaller and physical size. And the twist that we put on this computer is that we put a really powerful Mac in a little tiny box Wow. That's only two inches high. And, this is a full blown computer. There's a lot of computer in here. And you just hook up the display, an analog or digital display, industry standard industry standard US keyboard...

USB keyboard or mouse, and you've got yourself a Mac for $499. Amazing. That's the size of it? That's the size of whole computer right And it's got a slot load optical drive that lets you not only, you know, put software into it, but lets you play DVDs and burn CDs as well. So $499 gets you a heck of a computer. And we think it's gonna be pretty popular, and we think it's gonna remove even one more barrier for people switching, you know, so they can try out a Mac for the most affordable price point ever. So it sounds like the most affordable price point ever is sort of the net... The the next growth area, the big growth area for the company. Earlier at the conference, you said that you'd like to go after the remaining mainstream flash market that is flash memory. What's the strategy there?

And and is the goal here to come in with products that are accessible to a broad, base of people that is taking prices down so that they're accessible for a larger number of people? Well, you know, we have... Until today, had three models of iPods. We have the iPod photo at the high end. We had the iPod, and we had the iPod mini. And we're adding a fourth model of iPod today that lowers the price point to get an iPod to $99 because we wanna bring as as many people as we can into this digital music revolution, and we think the iPod Shuffle is gonna do exactly that. Is... Mister Jobs, I'd like to have you just riff for a little bit about about how you see the soul of Apple, the company, these days. Is Apple... I don't mean to over simplify it, but is is Apple now a digital media company?

Is it still a computer company? What is it? Well, you know, Apple loves to make great products. And so, if there's one word that characterizes the culture at Apple concerning products, it's excellence. We want to make great products. So we didn't just want to make, you know, a frumpy looking entry level Mac. We want to do something a little nicer and so the Mac mini resulted from that. We didn't want to make one more flash player. We wanted to make one of the smallest and lightest and best ones in the world. And so that's where iPod shuffle comes from. And several years ago, we realized that the personal computer was gonna was gonna transform itself into the media hub of your digital life. And so we were the folks that pioneered editing video on a computer, editing...

Creating music on a computer, burning DVDs on a computer. We were the first to do all of that stuff. And we have the best software in the world and we make the best computers in the world to do that. So the computer world is moving more towards media. And media is moving more towards computers with the advent of digital music. So they're kind of meeting in the middle. And I think Apple Apple's core expertise outside of phenomenally good engineering is really to figure out how to make complex technology easy to use by us mere mortals. And I think, you know, that's what we strive to do in the music space and in the computer space. And you've got a number of industries sort of rallying around your company. For example, the automotive industry, you just did a deal with Mercedes Benz, see, so that... And you're doing other automakers as well so that you can have your iPod in your car.

Right? Yeah. You know, iPod owners wanna listen to their iPods in their cars. So we did something with BMW the middle of last year where they they start... Began to sell an adapter where you could plug your iPod in and hear it through your stereo in your in your BMW and control it, control the volume, and and control the song from the steering wheel so you don't have to take your hands off the wheel. And, we're continuing to do some great stuff with BMW. They've been they've been, you know, swamped with orders for that adapter in their cars. And today, we announced that Mercedes and Nissan and Volvo, and Scion and Alfa Romeo and Ferrari are all gonna be offering iPod adapters in their cars in 2005. So it's really catching on like wildfire.... Get one for your Ferrari, Maria.

One of the things happening is... Once you get that iPod to work again, you get one for your Ferrari. I love the iPod. Let me ask you, mister Jobs, a a question about how many iPods you sold during the holiday season. You know? Yeah. Oh, yeah. We do. And we announced it today. In the two... Just to put in context, context, holiday season 2003, we sold 733,000 iPods, which was a huge number for us. This last holiday season, holiday season 2004 that just ended, we sold over four and a half million iPods. That's a 500% year over year growth, and we're thrilled. What do you think about the stock performance today? I mean, clearly, you know, I'm not asking you to be a stock picker, and there's no no debating the success of the company, the stock, and the products. But for some reason today, you're looking at a more than $3 sell off.

Perhaps things were priced into the stock after after your commentary. But did you say anything at that conference that perhaps could have got some investors selling? You know, I've I've given up a long time ago trying to predict stocks on a day to day basis. You have to look at them a little longer term and I think Apple stock's been performing pretty well for, you know, for long term shareholders. Yeah. No kidding. Would you say that Apple single handedly was a major part of changing the music industry? Well, I think if you ask the music companies, that's what they would say. And they've been super supportive of us, and and we're working really closely with them to try to come up with even more innovative ways to, you know, to get music discovered and and to get it to the market. So, you know, I think you should go ask them, but I've I've heard several of them say that. Mister Jobs, good to have you with us.

Thanks. It's great to be here. Thanks so much. Thanks for coming on CNBC. First, Steve Jobs, CEO of Apple Computer, today live in San Francisco.