With serious competitors for its MediaSmart home server finally coming to the U.S., Hewlett-Packard today is announcing a big software update of the Windows Home Server-based system.

Highlight include new software for automatically converting videos to a mobile format so they can be loaded onto the iPhone, iPod, PlayStation Portable and other mobile devices.

HP also developed an iPhone app called "iStream" that enables users to stream video from their home server directly to an iPhone or iPod Touch.

The system will store two versions of video content, one optimized for mobile devices and the original high resolution version for streaming around a home network.

HP has dominated the U.S. market for prebuilt Home Servers with only scattered competition, but Asus and others are rolling out their own systems, including some based on the power-efficient Atom processor. The products also face growing competition from increasingly sophisticated network attached storage devices that still aren't nearly as powerful but cost much less per gigabyte.

The latest generation of HP MediaSmart servers were announced in January. The software update announced today also includes improvements to its "media collector" feature, the way it interacts with Apple's "Time Machine" backup system and the ability to create public and private folders in its photo viewer application.

Servers built on Microsoft's Windows Home Server software centralize home file storage, provide Web access to files and backup and restore PCs on a home network. HP's start at $599 but street prices for the base model range from $499 to $550.

An HP spokeswoman declined to comment on whether a lower-end, 640-gigabyte version is coming soon, as suggested by recent reports on gadget blogs. The company also said the upgrade is only for the latest, Celeron-based MediaSmart servers.