By Scott Martin

Apple CEO Steve Jobs delivered further details at Macworld on Tuesday on the company’s slim set-top device formerly known as iTV.

The additions to iTV—now officially known as Apple TV—include Wi-Fi and a 40-gigabyte hard drive, making a stronger connection from computers using iTunes to living room entertainment systems.

The moveputsApple’s iTV center stage in a showdown against Microsoft’s Xbox IPTV for a stake in entertainment revenue from the digital home.

“It’s got a new name—it’s called Apple TV,” said Mr. Jobs.

In a last-moment announcement at the packed event, Mr. Jobs added that Apple Computer would drop the “Computer” from its name, changing itself to Apple Inc. to better reflect where the company is today.

He also announced that Apple has struck a studio deal with Paramount for iTunes distribution. Apple TV will allow people to wirelessly push media from iTunes at their computer to their set-top boxes.

“So it’s a really cool box,” said Mr. Jobs. “It works with video, music, and photos—it was designed for wide-screen TVs.”

Such a statement can’t spell out more clearly an ambition for the living room. Mr. Jobs said Apple will ship the set-top box, which features an Intel processor, in February and will begin taking orders right away. The device will cost $299, as previously expected.

Apple TV will auto sync with a computer. The set-top device will allow streaming of media from five PCs simultaneously. Its Wi-Fi technology supports the 802.11b, g, and n standards. The media box will deliver resolution of 720p high definition, or HD.

Apple will be competing in the home entertainment arena with Redmond giant Microsoft. Chairman Bill Gates opened fire Sunday evening at the Consumer Electronics Show in Las Vegas with the software maker's entertainment strategy (see Gates Readies for War With Apple).

“They’re both taking their respective paths into the living room,” Gartner analyst Mike McGuire said.

Industry observers could see signs of an entertainment battle shaping up. That picture came into sharper focus when Microsoft recently made the Xbox 360 into a conduit for HD movie and TV downloads.

For Apple and Mr. Jobs a cloud of uncertainty still hangs over the company in its accounting of stock options backdating. In an independent internal investigation the company has cleared Mr. Jobs of any wrongdoing, but in part of wider investigation of the industry, the company still needs to pass muster with the Department of Justice and the U.S Securities and Exchange Commission.

Shares of Apple rose $7.03 to $92.50 in recent trading, while Microsoft shares climbed $0.10 to $30.03.

iTV Expected

An iTV announcement was widely expected for Macworld. At a San Francisco event in September, Apple introduced a slim set-top box intended for shuttling entertainment between computers and home entertainment systems (see Apple Attacks Digital Living Room). The box had been expected to go on sale in the first quarter of 2007 for $299.

“They have redefined the portable mobile part, so the living room is the obvious place for them to go,” Mr. McGuire said.

Along with the iTV intro, Apple also said in September that it planned to sell movies from Pixar, Disney, Touchstone, and Miramax through iTunes.

It was widely expected that Macworld would see more such deals announced with studios.

iTunes Update

Mr. Jobs touted iTunes’ sales progress, dismissing reports that the service hadn’t done so well. “We have sold over 2 billion songs on iTunes,” he said. “We are selling over 5 million songs a day. We sell more music than Amazon.”

Mr. Jobs said that Apple has now sold 50 million TV shows on iTunes.

On the hardware side, he said that Apple has 62 percent of the digital media player market with its iPods, compared with Microsoft Zune’s 2 percent.

This year’s Macworld has become one of the most highly anticipated Apple events in a long time. The big announcement was the long-rumored iPhone from Apple (see Macworld: Steve Jobs’ iPhone Call).The two major product intros helped make up for previous disappointments.

Event attendees were somewhat let down in September by Apple’s iPod announcements. It had been hoped at the event that month that Apple would pump up the screen sizes, go wireless, or come out with something new for the iPod.

With the increased focus on video capability and the iTV as a possible video marriage to the living room, it had seemed a missing component.

It has now become clear that Mr. Jobs and Apple had been working on the next generation of digital music, confirming years of speculation. The iPhone device, he said, will employ the same know-how as it has done on iPods, providing a fully integrated approach to software and hardware design.