Macworld fizzles with no surprises

By Gabriel Madway and Yinka Adegoke

SAN FRANCISCO/NEW YORK (Reuters) - Apple (AAPL.O) announced plans to drop copy protection from songs sold over the Internet and debuted a slim, big-screen laptop, but with no dramatic products or master pitchman Steve Jobs, the company's final Macworld performance disappointed Wall Street.

Apple shares slid by as much as 2.3 percent, lagging the Nasdaq's .IXIC 1.5 percent gain and reflecting frustration over the lack of news from the trade conference that had introduced the iPhone to the world.

Investors remain hopeful the firm, expected to focus on marketing this year rather than shuffling out groundbreaking products in the midst of a global economic downturn, will in coming months unveil new desktop products or modifications to its best-selling iPhone.

"There were some innovative products, but no true blockbusters," said Robert Francello, head of equity trading for the Apex Capital hedge fund in San Francisco. "People were bullish going into it, and now they're kind of taking money off the table."

Apple said its iTunes music store, the world's biggest digital music retailer with sales of 6 billion songs since 2003, will offer its 10 million-song library free of digital rights management -- or copy-protection -- by the end of the quarter, for between 69 cents and $1.29 (87p) apiece.

Songs will also be available straight to iPhones over the air, instead of through a computer.

The agreement, struck with labels including Vivendi's (VIV.PA) Universal Music Group, Sony Corp's (6758.T) Sony BMG, Warner Music Group (WMG.N) and EMI, brings iTunes in line with rival sites such as Amazon.com (AMZN.O) and Napster and will heighten competition in an already-tough marketplace, analysts say.

Copy protection was designed to prevent fans from illegally sharing digital downloads, but it also prevents or slows legitimate buyers from moving their own songs between devices.