SAN FRANCISCO-Apple Inc. yesterday unveiled a next-generation
iPhone with faster Internet access that will run on advanced wireless networks
and sell for as low as $199 - half the current entry-level price.
Shares of Apple, after strong gains in recent months partly
driven by anticipation of the new device, fell 2.2 percent after chief executive
Steve Jobs indicated the company was going after the mass market with the new
model.
"It changes the game for all smart-phone makers," Tim Bajarin,
head of consultancy Creative Strategies, said of the price and new features.
The new phone also marks a dramatic departure for how Apple
will make money in its third major business alongside Macintosh computers and
iPod media players.
Wireless network companies will no longer pay Apple part of
the subscription fees they get from iPhone users, but instead will subsidize the
devices up front to make them cheaper.
"The vast majority of agreements we have reached do not have
those follow-on payments, so you can conclude that the vast majority of carriers
do provide subsidies for the phone," Tim Cook, Apple's chief operating officer,
told Reuters.
Cook declined to comment on how the new arrangement would
affect Apple's profit margins, but AT&T Inc, the exclusive US carrier for the
iPhone, said the subsidy would hurt its earnings and margins through next year.
"It is still a very profitable business. Now the negative is
they announced the elimination of some of the monthly fees," said Shaw Wu, an
analyst with American Technology Research. "But I can't really imagine the
economics really being too much different."
Improved e-mail features for the iPhone are intended to woo
business people, while its ability to run on faster networks are key to Apple's
push to gain market share in Europe and Asia.
"It's amazingly zippy," Jobs said, showing off the encore to
a device that melds a mobile phone, iPod media player and Web browser, nearly a
year after the original went on sale.
The new one, which looks similar to the old one but with
glossy black or white plastic in place of a metal back cover, loads Internet
pages 2.8 times faster than the original, he said.
An entry-level version of the new iPhone, with 8 gigabytes of
memory, will cost $199, versus $399 for an older iPhone with similar memory. A
version of the new one with twice the memory will cost $299.
"These lower price points seem somewhat designed to cope with
the economy, the softer environment," Wu said. "They definitely make this
product more resilient."
The new phones will go on sale on July 11 in 22 countries and
regions, expanding to 70 by the end of the year.
As for China, the biggest cell phone market in the world and
one where Apple does not have a deal to sell iPhones, Cook told Reuters the
company would get there "over time," and CNBC quoted Jobs as saying Apple hoped
to be there later this year.
The new iPhone will run on third-generation (3G) wireless
networks and includes satellite navigation capability, Jobs told developers at a
conference in San Francisco.
"This positions Apple well vis a vis other smart-phone
competitors such as Nokia and RIM," said Shannon Cross of Cross Research. "IPhone
is no longer an expensive device. It's now priced at the mass market."
Shares of Palm Inc, maker of the rival Treo smart-phone, fell
4 percent, but those in Research in Motion, maker of BlackBerry devices, rose 2
percent.
A new service, "MobileMe," will automatically send e-mail and other
information to iPhones, similar to Microsoft Corp's Exchange e-mail server
product. The pay service will replace Apple's Mac service and offer Web
applications intended to make the phone work more like a desktop computer. -
Reuters
