SAN FRANCISCO (Reuters) - Apple Computer Inc. on Thursday launched the long-awaited Windows-compatible version of its iTunes online music service, promising a wider library of songs and new features to maintain its lead in an increasingly competitive market.

Apple also announced a marketing pact with PepsiCo Inc. (PEP.N) to promote the wider availability of its song-download service, saying that it would give away some 100 million free tracks to lucky soft drink buyers in a promotion starting on Super Bowl Sunday in February and running for 60 days.

The company also raised the bar for itself, setting a goal of selling 100 million songs by April 28, 2004, one year from the music store's launch. To meet that goal, Apple said it would make it easier for AOL's (AOL.N) 25 million subscribers to register for the iTunes service and use it to buy music.

It unveiled new add-ons for its popular digital music player, the iPod, that allow it to be used for voice recording and digital photo storage, with digital photos automatically downloaded into Apple's iPhoto software when users place the iPod into its cradle plugged to a Macintosh computer.

In a characteristically glitzy presentation, Apple (AAPL.O) co-founder and Chief Executive Steve Jobs chatted via remote link-up with U2 front man Bono and the Rolling Stones' Mick Jagger, before calling singer-songwriter Sarah McLachlan on stage for a live performance.

HELLO, DALI

"It's like the pope of software meeting up with the Dali Lama of integration," Bono said, of the iTunes software and integrated online music store now available for free download for Windows and Mac users at the company's Web site.

With the Windows version, Apple is looking to bring iTunes to a far wider audience: the 90 percent-plus of personal computers that use Microsoft Corp.'s (MSFT.O) Windows operating system. Apple has about a 5 percent market share of the installed PC user base.

But analysts have said Apple faces a tougher market in the Windows market for digital music, because there are competing services already available, such as MusicMatch and another called BuyMusic.com.

And MusicNow, owned by closely held, Chicago-based FullAudio, will announce an a la carte download music service with all the major record labels and others in the next few weeks, a company spokeswoman told Reuters. To date, MusicNow has been a subscription-based service.

"There's going to be a lot of jockeying for position in the next 12 months," said Josh Bernoff, analyst with Forrester Research. "But I think iTunes is a real winner because it has the portable player, the jukebox and the store all together."

Jobs said iTunes had pioneered the mass-market appeal of legal song downloading and promised to take that momentum to its wider release for Windows, adding that the company's own surveys show that consumers don't want to "rent their music," they want to own it.

"This isn't some baby version of iTunes. It's the whole thing," Jobs said. He cited data from Nielsen SoundScan showing that as of last week it accounted for about 70 percent of all legal downloads.

BIRTH OF A NOTION

Apple's pumped-up online music service will now feature over 400,000 tracks by the end of the month, double the amount available at launch almost six months ago. The Macintosh version of the download service has sold more than 13 million songs during that time.

"This has been the birth of legal downloading," Jobs said.

Jobs said the new version of iTunes would also offer a library of some 5,000 audio books and allow parents to set a monthly allowance of up to $200 for children to download songs, an attempt to cut back on the illicit file-swapping that the record industry has challenged in court. Gift certificates are also available.

The audiobooks will be offered exclusively through iTunes by Audible Inc. (ADBL.OB), the companies said.

Among its competitors will be the pioneering file-swapping service Napster, which has been resurrected as a pay-for-use music service under parent company Roxio Inc. (ROXI.O).

As for the tie-up with Pepsi, it could give the soft-drink company a boost. Pepsi, whose profits rose sharply in the past year on strong sales of salty snacks and some new drink offerings, has been looking for ways to boost its trademark cola.

Shares of Apple fell more than 6 percent to close at $23.24 in active trade on the Nasdaq. The stock has gained 62 percent so far this year.