The rumors turned out to be true. Apple Computer Tuesday introduced a $499 Macintosh, vaulting the company into the market for budget-priced desktop computers. The "Mac Mini"--another model is priced at $599--seeks to lure bargain-hunting PC buyers to Apple's brand, CEO Steve Jobs said at the company's MacWorld conference in San Francisco.

"We want to price this Mac so that people who are thinking of switching have no more excuses," he said. In the run-up to the annual trade show, independent Apple rumor Web sites abounded with speculation that the company would introduce a cheaper Macintosh to compete with Windows-equipped PCs.

Standing in front of a giant screen that posed the question of why Apple hasn't offered a stripped-down, more affordable Mac, Jobs held his new 3-pound, 2-inch tall computer aloft and said, "I wish I had a nickel for every time someone asked me that." The $499 Mac Mini features a 1.25-GHz processor, 256 Mbytes of memory, and a 40-Gbyte hard-disk drive. The $599 model includes a 1.42-GHz CPU, 256 Mbytes of RAM, and an 80-Gbyte hard drive. The computers also can play DVDs and can burn CDs. Both will be available Jan. 22, and require customers to supply their own display, keyboard, and mouse.

Apple's flat-screen iMac G5 desktop, by contrast, starts at $1,299. "It's the cheapest computer Apple's ever offered," Jobs said of the Mac Mini. "This is a very robust computer, but it's very, very tiny."

Earlier this month Apple sued a rumor site called thinksecret.com that published purported details of a low-cost Mac, saying it tried to get Apple staffers or contractors to disclose company secrets.

By launching a low-priced Mac, Apple could capitalize on sales of its iPod digital music player by offering consumers an affordable computer to use with it. Apple has sold 10 million iPods to date, and Jobs said the company sold 4.5 million in the fourth quarter of last year. Now, Apple wants to expand its market share by taking sales from lower-priced music players that use flash memory similar to the type used in digital cameras, instead of a hard drive to store songs, like the iPod does. The company today began shipping a new product called "iPod Shuffle." The small, white flash-memory music player starts at $99 and stores less music than Apple's standard iPods, which are priced from $299 to $399.

The iPod Shuffle--smaller than a pack of gum and weighing less than an ounce, comes in a $99 version that stores 120 songs on 512 Mbytes of memory, and a $149 version that stores 240 songs on 1 Gbyte of flash memory. "We think it's going to make the iPod accessible to even more people," Jobs said.

The black-turtleneck-clad CEO also introduced a new version of the company's iLife software suite that includes apps for photo, video, and music editing, and a new suite called iWork that packages the company's keynote presentation software with a new word processor called Pages. Both will be available this month. Apple is also on track to ship the next upgrade to its Mac OS X operating system, code-named "Tiger," by June.

Shares of Apple were down $3.74, or 5.4%, at $65.22 in late Tuesday afternoon trading.