Suspense builds ahead of Apple extravaganza

By Alexei Oreskovic

SAN FRANCISCO (Reuters) - Apple Inc (AAPL.O) kicks off its annual developers' extravaganza on Monday under a tight lid of secrecy, with investors expecting the electronics maker to unveil new or cheaper versions of its popular iPhone.

Thousands of customers, developers and investors are set to convene in San Francisco for Apple's Worldwide Developers' Conference, hoping to catch a glimpse of its latest high-tech wonders.

But while Apple made waves with its unveiling of the 3G iPhone at last year's event, this year's takes place against a more uncertain backdrop.

Steve Jobs, Apple's charismatic CEO and master showman, is still on medical leave and not due back until July. And the first credible challenger to Apple's iPhone, Palm Inc's (PALM.O) new Pre smartphone, makes its grand debut on store shelves just two days before Apple's gala.

While many analysts believe Apple has a variety of new gadgets in the pipeline -- from new iPhone models to a long rumored, so-called tablet mini-PC -- the company has said the conference will focus on important but less sexy software operating system upgrades.

Others on Wall Street believe the stage is set for a surprise product announcement.

Apple's shares have risen about 17 percent in the past two weeks, compared with a 5.7 percent gain in the Dow Jones Industrial Average during the same period.

"The consensus expectation is that they will also announce the next iteration of the iPhone," said Oppenheimer & Co analyst Yair Reiner.