Business

iPhone's getting faster, cheaper

Apple Inc. chief executive Steve Jobs delivered the first major makeover of the iPhone, unveiling a faster, cheaper handset that may help him persuade business users to switch over from the BlackBerry.

Apple sank 2.2 percent in Nasdaq trading after saying carriers won't have to give the company a cut of the lucrative monthly service fees from the new third-generation phones.

Jobs is seeking to make the iPhone more mainstream, lowering the price on one model to $199 from $399 and adding programs for the business users who have made Research in Motion Ltd.'s BlackBerry the top-selling Web-surfing handset in the U.S.

“The main restriction was price, and they've taken that away,” said Hakim Kriout, an analyst at municipal bond trading and underwriting firm Grigsby & Associates in New York. “At that level, Apple can sell more iPhones, which will compensate for the loss of revenue sharing.”

Apple, based in Cupertino, Calif., fell $4.03 to $181.61 at 4 p.m. on the Nasdaq Stock Market. Before Monday, the shares had surged 56 percent after dropping to a low this year of $119.15 in February on concern that an economic slowdown in the U.S. would depress sales of iPhones and iPod media players.

The new, thinner phone will go on sale in 22 countries on July 11 and run on third-generation, or 3G, wireless networks that deliver Internet content at least two times faster than the prior model, Jobs said Monday at Apple's developer conference in San Francisco.

AT&T Inc. will subsidize the cost of the handset in the U.S., where it's the exclusive iPhone carrier. Apple declined to say how much carriers are paying for each phone, except that it's more than the selling price, according to chief operating officer Timothy Cook.

Customers will be required to activate the iPhone at AT&T or Apple stores to discourage the practice of “unlocking” the device for use on other networks, said Ralph de la Vega, CEO of AT&T's wireless unit.

In a regulatory filing, Apple said it won't get payments from carriers for the new phone beyond the original purchase price. The company will still get a cut of revenue from older models running on authorized networks.

On Monday, Cook reiterated the company's goal of shipping 10 million units this year, more than double the number in 2007.

Apple sold its inventory of the older models sooner than it planned, Cook said in an interview. The company decided to cut the price after finding that 56 percent of the people it surveyed said the phone was too expensive, he said.

“It wasn't that the phone didn't appeal,” Cook said. “All of these people wanted it, but paying $399 was too much.”

The new model, which eventually will be available in 70 markets this year, has a 3.5-inch touch screen and built-in global positioning technology. The black, 8-gigabyte version will cost $199; the 16-gigabyte model, available in white or black, will sell for $299.

“$199 is right in the sweet spot of where we are seeing pricing going in the smart-phone market,” Ross Rubin, an analyst at NPD Group in New York, told Bloomberg Radio. “The giveback on carrier subsidies isn't that much of a concern. They need to build a base for developers.”

Jobs introduced the new phone in tandem with revamped software, including the $99-a-year MobileMe service, which offers e-mail forwarding, and automatic calendar and contact updates. Thirty-five percent of Fortune magazine's 500 biggest U.S. companies have tested new iPhone software, he said.

“Everything they told us they wanted, we have built right into iPhone 2.0 software out of the box,” Jobs said.

Testers included News Corp.'s Fox Interactive Media, Walt Disney Co., the U.S. Army and Genentech Inc. Also, 4,000 software developers have been admitted to the iPhone developer program, Jobs said.

The business software, announced in March, will also have added security functions and support Microsoft Corp.'s Exchange message system, the most popular program used by corporate e-mail users.

Developers demonstrated some of the applications they've created for the phone. EBay Inc. will offer a free program to let users access its online auction site. Major League Baseball's MLB.com came up with a tool exclusively for the iPhone that lets people watch video clips and track scores.

Video-game maker Sega will sell an iPhone version of “Super Monkey Ball” for $9.99. The applications will be sold through the online store Apple is setting up at its iTunes site for iPhone programs.

New operating system

Jobs also announced the next Macintosh operating system, called Snow Leopard. The current iteration, Leopard, went on sale in October and lets users also run Microsoft Corp.'s rival Windows system on their Macs.

The Mac personal computer is still Apple's main sales engine, accounting for almost half of last quarter's revenue. Apple is the third biggest seller of PCs in the U.S., behind Dell Inc. and Hewlett-Packard Co., according to research firm IDC.

Apple Inc. chief executive Steve Jobs delivered the first major makeover of the iPhone, unveiling a faster, cheaper handset that may help him persuade business users to switch over from the BlackBerry.

Apple sank 2.2 percent in Nasdaq trading after saying carriers won't have to give the company a cut of the lucrative monthly service fees from the new third-generation phones.

Jobs is seeking to make the iPhone more mainstream, lowering the price on one model to $199 from $399 and adding programs for the business users who have made Research in Motion Ltd.'s BlackBerry the top-selling Web-surfing handset in the U.S.

“The main restriction was price, and they've taken that away,” said Hakim Kriout, an analyst at municipal bond trading and underwriting firm Grigsby & Associates in New York. “At that level, Apple can sell more iPhones, which will compensate for the loss of revenue sharing.”

Apple, based in Cupertino, Calif., fell $4.03 to $181.61 at 4 p.m. on the Nasdaq Stock Market. Before Monday, the shares had surged 56 percent after dropping to a low this year of $119.15 in February on concern that an economic slowdown in the U.S. would depress sales of iPhones and iPod media players.

The new, thinner phone will go on sale in 22 countries on July 11 and run on third-generation, or 3G, wireless networks that deliver Internet content at least two times faster than the prior model, Jobs said Monday at Apple's developer conference in San Francisco.

AT&T Inc. will subsidize the cost of the handset in the U.S., where it's the exclusive iPhone carrier. Apple declined to say how much carriers are paying for each phone, except that it's more than the selling price, according to chief operating officer Timothy Cook.

Customers will be required to activate the iPhone at AT&T or Apple stores to discourage the practice of “unlocking” the device for use on other networks, said Ralph de la Vega, CEO of AT&T's wireless unit.

In a regulatory filing, Apple said it won't get payments from carriers for the new phone beyond the original purchase price. The company will still get a cut of revenue from older models running on authorized networks.

On Monday, Cook reiterated the company's goal of shipping 10 million units this year, more than double the number in 2007.

Apple sold its inventory of the older models sooner than it planned, Cook said in an interview. The company decided to cut the price after finding that 56 percent of the people it surveyed said the phone was too expensive, he said.

“It wasn't that the phone didn't appeal,” Cook said. “All of these people wanted it, but paying $399 was too much.”

The new model, which eventually will be available in 70 markets this year, has a 3.5-inch touch screen and built-in global positioning technology. The black, 8-gigabyte version will cost $199; the 16-gigabyte model, available in white or black, will sell for $299.

“$199 is right in the sweet spot of where we are seeing pricing going in the smart-phone market,” Ross Rubin, an analyst at NPD Group in New York, told Bloomberg Radio. “The giveback on carrier subsidies isn't that much of a concern. They need to build a base for developers.”

Jobs introduced the new phone in tandem with revamped software, including the $99-a-year MobileMe service, which offers e-mail forwarding, and automatic calendar and contact updates. Thirty-five percent of Fortune magazine's 500 biggest U.S. companies have tested new iPhone software, he said.

“Everything they told us they wanted, we have built right into iPhone 2.0 software out of the box,” Jobs said.

Testers included News Corp.'s Fox Interactive Media, Walt Disney Co., the U.S. Army and Genentech Inc. Also, 4,000 software developers have been admitted to the iPhone developer program, Jobs said.

The business software, announced in March, will also have added security functions and support Microsoft Corp.'s Exchange message system, the most popular program used by corporate e-mail users.

Developers demonstrated some of the applications they've created for the phone. EBay Inc. will offer a free program to let users access its online auction site. Major League Baseball's MLB.com came up with a tool exclusively for the iPhone that lets people watch video clips and track scores.

Video-game maker Sega will sell an iPhone version of “Super Monkey Ball” for $9.99. The applications will be sold through the online store Apple is setting up at its iTunes site for iPhone programs.

New operating system

Jobs also announced the next Macintosh operating system, called Snow Leopard. The current iteration, Leopard, went on sale in October and lets users also run Microsoft Corp.'s rival Windows system on their Macs.

The Mac personal computer is still Apple's main sales engine, accounting for almost half of last quarter's revenue. Apple is the third biggest seller of PCs in the U.S., behind Dell Inc. and Hewlett-Packard Co., according to research firm IDC.

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