By Yinka Adegoke and Gabriel Madway
NEW YORK (Reuters) - Apple introduced a smaller version of its popular iPod Shuffle music player on Wednesday with a new feature that tells the user what song is playing.
The new 4-gigabyte gadget costs $79, is half the size of the previous Shuffle, and carries up to 1,000 songs -- twice as many as the last generation of the device.
All of the controls on the new Shuffle have been moved from the device to the earphone cord. The new VoiceOver feature announces songs and playlists to users in 14 different languages, according to Apple, whose shares rose 4.5 percent.
The voice function is particularly useful on the Shuffle, which does not have a display screen like most iPods or other digital music players.
Needham & Co analyst Charles Wolf said the new Shuffle design was appealing and called the voice function a "nice a little gimmick. It shows that Apple intends to keep that piece of the portfolio going. They're going to continue to innovate, upgrade the sub-$100 device."
"It won't necessarily stimulate sales, but it clearly will keep sales of the Shuffle going forward," he said.
The VoiceOver feature works by synchronizing with iTunes software, which installs a voice kit on the user's computer. VoiceOver can also tell a user how much battery life remains.
"You previously couldn't have multiple playlists on the iPod Shuffle because you couldn't really switch between them as there was no way to know how you would switch," said Greg Joswiak, Apple vice president of iPod marketing, told Reuters. "So now instead of seeing, you get to hear."
Although Apple does not break out Shuffle sales, Needham's Wolf estimated some 7.5 million units were sold in the December quarter, it's biggest-selling quarter. Apple sold 22.7 million iPod units overall in the period.
The third generation of iPod Shuffle will be the world's tiniest music player, smaller than an AA battery. It comes in two colors, silver and black.
Apple will continue to sell the second-generation version of the 1-gigabyte, 240-song Shuffle for $49. but phase out the 2-gigabyte Shuffle, which sells for $69.
The iPod music player has played an important role in the revival of Apple's fortunes. The company has sold more than 200 million iPods since they launched in 2001. It launched the first Shuffle in January 2005.
The refreshed Shuffle comes just a week after the company updated its line of Mac desktop computers. Apple refreshed it MacBook laptop computers last fall.
Shares of Cupertino, California-based Apple rose $3.97 to $92.59 in early afternoon trading on Nasdaq.
(Reporting by Yinka Adegoke and Gabriel Madway; Editing by Derek Caney, Steve Orlofsky and Jeffrey Benkoe)
A second-generation iPod Shuffle. 
Yesterday, Apple Computer revealed the third-generation version of its iPod Shuffle model, which introduces new features including a voice that tells the user what song is playing in their playlist through the user's headphones. Apple stated that the iPod will have 4 gigabytes of space, which is enough to hold approximately 1,000 songs, twice as much as the second-generation Shuffle.

In the announcement of the device, Apple told the media that the new voice system, called "VoiceOver", will completely replace all of the button controls on the device, and will allow the user to find information about the current song, playlist, and the current battery life remaining. It will be available in 14 languages, which include English, Japanese, German, and French. The new model is also about two times smaller than the second-generation Shuffle, being described as slightly smaller than the size of a AA Battery.

"You previously couldn't have multiple playlists on the iPod Shuffle because you couldn't really switch between them as there was no way to know how you would switch. So now instead of seeing, you get to hear," said Greg Joswiak, the Vice President of iPod Marketing at Apple.

The new iPod was stated to be available in two colors, silver and black, and is expected to be priced at $79, $10 higher than the previous model. The current second-generation's 1 gigabyte and 2 gigabyte models will continue to be sold after the release of the device.

"These are exactly the kinds of products you need to come up with in the midst of a recession. It's not a stripped-down experience. It has a new cool user interface that isn't even on the high-end iPods. Apple has worked hard not to make this a race to the bottom," said a market analyst for Jupiter Research.