Apple Makes iPhone Call
Incorporating the music-storage and playback capabilities of the iPod with GSM and EDGE connections, email and messaging functions, support for WiFi and Bluetooth, and a 2 megapixel camera -- all in a sleek, 11.6mm-thick keyboard-less device with a 3.5-inch screen -- the iPhone will come in two versions, a $499 4-Gbyte model and an 8-Gbyte model for $599. To be sold initially through Cingular Wireless , the iPhone will be available in June.
Jobs' announcement ends more than two years of frenzied speculation in the blogosphere and marks Apple's entry into the fiercely competitive, low-margin handset business. (See iPhone Prepares for Launch.)
The debut of the iPhone coincides with the official launch of Apple TV -- a set-top box that allows users to display content downloaded from the Internet on their TV sets -- which was previewed last fall. It also heralds a potential trademark dispute with Cisco Systems Inc. (Nasdaq: CSCO), whose Linksys division released a product dubbed "iPhone" earlier this year. (See You Say iPhone, I Say...?)
Jobs' prediction for the new iPhone was at once modest and ambitious: He hopes the new handset will grab 1 percent of the global cellphone market, in which almost 1 billion units were sold in 2006. That would be a huge boost in volume over sales of the super-popular iPod, which has sold almost 70 million units since its 2001 debut.
As many industry analysts noted, however, Apple faces a radically different challenge in breaking into the cellphone market. For one thing, the iPod was virtually unique when it was launched; music-playing smartphones, by contrast, are sold by carriers, low-price Asian manufacturers, and high-end device makers like BlackBerry . Gaining market share in this fiercely competitive space will not be easy even for a marketing juggernaut like Apple.
For another, the innovative Multi-Touch user interface -- which Jobs described as a revolution on the order of the computer mouse -- may actually deter some users who are accustomed to typing emails on a conventional raised-button keyboard.
Finally there's the price. At a time when many handset makers are moving downmarket, à la RIM with its new lower-priced Pearl smartphone, Apple will be asking users to shell out $500 to $600 for the Apple logo, ease of use, and cachet. Verizon Wireless , for instance, recently released a model made by LG Electronics Inc. (London: LGLD; Korea: 6657.KS) that has many of the features of the iPhone and is essentially free after rebate for existing subscribers. Apple is relying heavily on the wow factor of the iPhone to induce consumers used to shrinking cellphone prices to re-open their wallets.
The release of the iPhone comes at a crucial time for the Cupertino, Calif.-based computer and consumer-electronics maker. Sales of the iPod, while still brisk, are beginning to level off, and Steve Jobs himself remains under scrutiny in the stock-option backdating scandal that has already brought down several prominent CEOs.
Apple shares climbed more than 8 percent on the iPhone debut, while the shares of two rival smartphone makers -- RIM and Motorola Inc. (NYSE: MOT) -- declined sharply. RIM was down almost 8 percent, while Motorola, which has lost 29 percent of its value in the last three months, was down almost 2 percent.
— Richard Martin, Senior Editor, Unstrung