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With a New iPhone, Apple Lifts Its Profile

Posted on: Wednesday, 11 June 2008, 00:00 CDT

By John Markoff

Steve Jobs, chief executive of Apple, has introduced a less- expensive iPhone that connects to the Internet faster, expanded its distribution overseas and displayed a range of new applications and services in order to establish Apple as a major player in the cellphone industry.

Apple, the maker of consumer electronics and computer equipment based in Cupertino, California, had set a goal of selling 10 million iPhones in 2008, which would establish it as a major smartphone maker in the less than two years since it began shipping the original iPhone. Apple has sold six million phones globally since its introduction.

Analysts said Jobs, one of the world's best product marketers, had largely accomplished what he set out to do and they welcomed the moves he outlined in a presentation before Apple software developers on Monday.

"This is the phone that has changed phones forever," Jobs said.

Jobs said the new iPhone 3G, to be available in the United States through AT&T beginning July 11, will sell for $199 for the 8- gigabyte model and $299 for a 16-gigabyte model. He said the biggest barrier to people buying the phone had been price.

Apple will also offer the new phone in conjunction with Vodafone in Australia, Italy, New Zealand and Portugal on July 11; through the Orange network, the phone will be sold on the same date in Austria, France, Portugal and Switzerland. In Japan, the iPhone will be sold via Softbank.

No pricing was announced for the handsets outside of the United States.

Analysts and industry executives said they believed that the lower prices would bring in new consumers who had been put off by its $399 price. "The price is clearly correct," said Mike McGuire, a research vice president at Gartner, a market research firm based in San Jose, California.

As widely anticipated, the phone will run on so-called 3G wireless networks that allow much faster Internet connections than the original iPhone. During a 110-minute presentation, Jobs went to some lengths to compare the speed of the new iPhone 3G to the current phone and to rival phones like the Nokia N95 and the Palm Treo 750. He called downloads "amazingly zippy."

The phone, sleeker than the original, will also have built-in Global Positioning System capability to allow location-based services.

It will also have a longer battery life in some cases, five hours for talking on the 3G network and 24 hours for playing music on the phone.

The announcements came on the opening day of Apple's Worldwide Developers Conference, where several developers showed off software that turned the iPhone into a game console and a musical instrument.

Others demonstrated programs that used the phone's ability to locate its users on a map.

At one point during his demonstration, Jobs showed a tracking feature making it possible to watch on a Google map as an iPhone user drove down Lombard Street, the twisty tourist attraction in San Francisco.

Jobs also indirectly challenged Microsoft with a mobile Web service called MobileMe, intended to permit a user to synchronize a phone, calendar and contact information on the iPhone and multiple devices, including PCs and other iPhones. The service, which will cost $99 a year and comes with 20 gigabytes of data storage, is similar to a service offered by Microsoft.

Apple's obstacle in offering the new service is that its competitors, including Google, offer similar services for less. Google offers 10 gigabytes of e-mail storage for $20 a year.

Apple announced that it would begin selling the iPhone in 70 countries this summer; the current phone is being sold in six countries.

"Given the feature set, ecosystem partners, launch countries and the pricing of the iPhone, they are likely to hit the 10 million mark by September/October," said Chetan Sharma, an independent consultant on the wireless data communications industry.

Apple announced Monday in a regulatory filing that it would sell the 3G iPhones under different business arrangements in the United States. In the past, Apple shared service plan revenue with AT&T and other cellular companies. The new iPhone will be sold without the recurring revenue streams and without the exclusivity arrangements it was previously able to command.

While trying to convince cellular carriers around the world that they should carry the iPhone, Apple realized that it needed to change the financial deal that it had with the first six carriers.

"We've changed our business model, from getting a cut of the future revenues to just a more traditional model," Jobs said in an interview Monday. "That's enabled us to roll out around the world much faster."

AT&T said it would subsidize the phones to attract consumers in the United States.

Source: International Herald Tribune

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