iPhone Overdose

Source: Larry, NJ USA.

iPhone Line Has Started...100-Hours Early
MON JUN 25 2007 AT 6:09 PM
BY BRIAN LAM
Link

Two dudes are already waiting in line at the NYC 5th Avenue Apple flagship store. Even for the Sony PS3, PS2, and Nintendo Wii game consoles, I've never seen a 100-hour lead time on a gadget queue. I'm disgusted, but also kind of jealous.


First Apple iPhone shipments arrive stateside
By Kasper Jade
Published: 10:00 AM EST
Link

The first retail-bound volume shipments of Apple Inc.'s hotly anticipated iPhone device arrived successfully in the United States this past weekend, touching down quietly at a handful of drop locations just six days before the device is due to go on sale at nearly 2000 Apple and AT&T retail locations.

People familiar with the matter say the intrinsically valuable freight was carried inbound by a certain Hong Kong-based air courier, which services Atlanta, Chicago, Dallas, Los Angeles, New York and San Francisco. The early arrival is to assure the cargo can clear customs with enough time to handle unexpected delays, those people said.

Awaiting the freight at each location on Sunday were armed personnel, who were reportedly hired by Apple through its courier's ground handling agent and then cleared by the Transportation Security Administration. Armed guards are extremely unusual for freight coming out of the Asian sector, those familiar with the matter explained, and are typically reserved for shipments containing riches such as gold and diamonds.

Once on the ground, the iPhone shipments were to be broken down under the watch of the armed personnel, who would then observe the loading of the freight onto ground vehicles and become party to its transportation outbound.

It remains unclear where the eagerly sought Apple gadgets will spend the better part of the business week ahead of their planned launch Friday afternoon at 6:00 p.m. local time. It's possible, however, they could begin turning up in stockrooms of Apple and AT&T retail stores days in advance.

Apple management on Sunday began informing its retail personnel that beginning Monday, no cameras of any kind will be allowed in the back stockrooms of its retail outlets. The ban reportedly spans all cell phones -- regardless of whether they contain camera functionality -- and all personally owned Apple notebooks that feature built-in iSight video cameras.

This past weekend, Apple retail stores nationwide began preparing for Friday's iPhone launch with new planogram layouts, employee attire, and window displays that feature 4-foot iPhone replicas equipped with massive LCD displays screens.


Associated Press
Apple IPhone Hype Machine in Overdrive
By JORDAN ROBERTSON 06.26.07, 8:10 AM ET
Link

Even for a company that's mastered the art of product-launch hoopla, Apple Inc. appears to have pulled out all the stops to propel iPhone hysteria into the stratosphere.

Technology analysts say Apple started its publicity campaign for the iPhone uncharacteristically early, first showing off the device six months ago and shrewdly stoking the media feeding-frenzy since then with incremental announcements that have kept the sleek cell phone-multimedia player-Internet browser in the news.

It goes on sale this Friday, and die-hard Apple fans are expected to line up overnight or longer outside retail stores to get their hands on an iPhone for either $500 or $600.

But skeptics wonder whether even the most innovative product could live up to the iPhone's lofty expectations - and whether the pre-launch anticipation has spiraled too far out of control. Scrutiny of the product is so great that any small disappointment could send Apple's stock plunging, experts say.

Technology analyst Mike McGuire said Apple fans have elevated the status of the iPhone to unprecedented proportions - "somewhere between electricity and sliced bread."

"The blessing is you've created an amazing amount of demand. The curse is you have a very high level of expectations to meet," said McGuire, a research vice president with Gartner Inc. "If there's a misstep, there will be a lot of gloating people in the industry."

Apple claims the iPhone will be easier to use than other smart phones because of its unique touch screen display and intuitive software that allows for such user-friendly features as scrolling visually through voice mail messages and easy access to the Internet and video and music libraries.

The hype began when Apple CEO Steve Jobs took the wraps off the iPhone at the annual Macworld Conference and Expo in early January. The dramatic introduction - accompanied by thunderous applause and a standing ovation from thousands of Apple aficionados at a San Francisco convention center - was followed up by a public relations blitz and hundreds of articles in blogs, trade publications and the mainstream media.

The iPhone stayed in the news for weeks after the launch, thanks in part to a trademark-infringement lawsuit by Cisco Systems Inc. over rights to the name. Cisco said Apple's use of the iPhone name constituted a "willful and malicious" violation of a trademark that Cisco has owned since 2000.

In late February, San Jose-based Cisco - which sells a line of Linksys iPhones that make free long-distance calls over the Internet - and Cupertino-based Apple agreed to share the name.

Apple's iPhone returned to the forefront of newspapers and Web sites in May, as the company stock reached record heights and many Wall Street financial analysts said the sleek iPhone could be a profit-generating machine, similar to Apple's iconic iPod.

The iPhone has already generated a thriving cottage industry online, with more than 1,100 peripheral iPhone items currently for sale on eBay, including colorful holsters, touch-screen protectors and car adapters.

But the hype has also hurt Apple.

The launch is being so closely watched that Apple's share price plunged more than 4 percent in a matter of minutes last month after a rumor about a delay was reported on Engadget.com, an electronics Web site. The rumor was quickly corrected by Apple, and the stock largely recovered by the end of the day.

"That just shows how powerful this has become," said Chris Hazelton, analyst with market researcher IDC, who said the amount of hype is "almost dangerous to the success of the device."

"God knows what's going to happen when the reviews come out," he said.

Die-hard fans are expected to camp out in front of Apple and AT&T stores to get a shot at snagging one of the iPhones, which are being sold on a first-come, first-serve basis starting Friday evening.

Apple has been famously tightfisted in limiting the number of review units before a launch, and the iPhone is an extreme example of the lengths the company will go to keep its prized gadget under wraps until the last minute. So far only a handful of reviewers are believed to have gotten units.

Dan Frakes, senior editor at Macworld magazine, said he will be one of a half-dozen writers and editors from his magazine queuing up early Friday. He hopes to buy an iPhone so he can write a product review.

But like many people debating whether to buy the iPhone, he still has questions about whether the device can live up to the heightened expectations.

"If it works really well and does all these things well, I'd have no problem buying one on my own," he said. "That's the question out there right now - no one knows."


Apple, AT&T set three price plans for iPhone
Tue Jun 26, 2007 2:32PM BST
Link

NEW YORK (Reuters) - Apple Inc. and AT&T Inc. said on Tuesday they will offer three price plans, starting at $59.99 per month, for the widely anticipated iPhone that is set to go on sale this week.

The iPhone combines a wireless phone with music and video-playing capabilities and Web browsing. It will be sold exclusively through AT&T for at least two years.

Individual monthly plans, based on a two-year service agreement with AT&T, will be priced at $59.99 for 450 minutes, $79.99 for 900 minutes and $99.99 for 1,350 minutes, the companies said, adding that family plans were also available.


The plans include unlimited data, visual voice mail, 200 SMS text messages, roll-over minutes and unlimited mobile-to-mobile calling, they said.

The device itself, whose key feature is a touch-sensitive screen, costs either $499 or $599 depending on whether it has 4 gigabytes or 8 gigabytes of flash memory.

The iPhone is due to go on sale at Apple's retail stores and at AT&T outlets at 6 p.m. Friday. It will also be available at Apple's online stores.

Apple shares have gained nearly 35 percent since it unveiled the phone in January. On Tuesday, the shares rose 1 percent in premarket trading from its close of $122.34 on Monday.


Associated Press
IPhone Service Plans Start at $59.99
Associated Press 06.26.07
Link

AT&T Inc. and Apple Inc. on Tuesday said wireless services for the iPhone will range from $59.99 per month to $99.99 per month.

The much hyped gadget retails for $499 for a 4-Gigabyte model and $599 for an 8-Gigabyte model. It's slated to go on sale at 6 p.m. June 29 at Apple and AT&T retail stores.

The $59.99 plan includes 450 minutes of voice time; a $79.99 plan includes 900 minutes of voice time, and a $99.99 monthly plan includes 1,350 minutes. All three plans offer 200 text messages, unlimited data services, roll over minutes, and mobile-to-mobile services. There is also a $36 activation fee.

Apple shares traded at $123.70 in the premarket session, up $1.36 from Monday's closing price of $122.34.

AT&T shares traded at $39.24 in the premarket session, up 16 cents from Monday's closing price of $39.08.

Apple says iPhone can be activated by users at home

By AppleInsider Staff
Published: 08:00 AM EST
Link

Apple and AT&T Inc. said Tuesday that iPhone users will be able to activate their new iPhones using Apple's popular iTunes software running on a PC or Mac computer in the comfort and privacy of their own home or office, without having to wait in a store while their phone is activated.

Activating iPhone takes only minutes as iTunes guides the user through simple steps to choose their service plan, authorize their credit and activate their iPhone, Apple said. Once iPhone is activated, users can then easily sync all of their phone numbers and other contact information, calendars, email accounts, web browser bookmarks, music, photos, podcasts, TV shows and movies just like they do when they sync their iPods with iTunes.

"Users will be able to activate their new iPhone in the comfort and privacy of their own home or office, without having to wait in a store while their phone is activated," said Apple chief executive Steve Jobs. "There are tens of millions of people in the US who already know how to sync their iPods with iTunes, and syncing their new iPhone with iTunes works the same way."

iPhone, which goes on sale at 6:00 p.m. (local time) on Friday, June 29 at AT&T and Apple retail stores, introduces an entirely new user interface based on a revolutionary multi-touch display and pioneering new software that allows users to control iPhone with just a tap, flick or pinch of their fingers.

The device combines three products into one small and lightweight handheld device -- a mobile phone, a widescreen iPod, and the Internet in your pocket with applications phone for email, web browsing and maps. It will be available in a 4GB model for $499 (US) and an 8GB model for $599 (US), and will work with either a PC or Mac.

iPhone activation will require an Internet connection; an iTunes Store account or a major credit card; a valid Social Security number (as required by AT&T); the latest version of iTunes; and a PC or Mac with a USB 2.0 port and one of the following operating systems: Mac OS X v10.4.10 or later; Windows XP Home or Professional with Service Pack 2 or later; or Windows Vista Home Premium, Business, Enterprise or Ultimate Edition.

iPhone will require a new two-year AT&T service plan. Customers with existing AT&T accounts will have the option of keeping their existing phone number and upgrading their account to work with iPhone, Apple added.

An iPhone Activation and Sync video has been posted at Apple.com

Apple stores to offer 25 iPhone accessories near launch

By AppleInsider Staff
Published: 11:00 AM EST
Link

Apple Inc.'s retail stores plan to offer iPhone shoppers around two dozen accessories for the multi-function handset at or around the time the device goes on sale later this week, AppleInsider has been told.

The majority of those products will likely consist of third party cases and protective gear, which are amongst the simplest for outside firms to develop given their limited exposure to the Apple handset thus far.

In addition to those third party accessories, Apple will offer at least three of its own:

A stereo headset with mic, which will be included with each iPhone, will also sell separately for $29. Meanwhile, the company's little-mentioned Bluetooth headset will reportedly fetch a whopping $129, making it one of the most expensive on the market. Apple will also sell a white iPhone dock.

Over the past couple of weeks, AT&T retail stores have also turned up periodic shipments of third party iPhone accessories. Again, these products consist primarily of cases and protective gear.

In particular, two DLO cases -- one called Jam Jacket and another called HipCase -- where spotted and photographed over the weekend.


Analyst alleges iPhone already hitting Palm sales
By Tony Smith
26th June 2007 10:09 GMT
Link

Apple's iPhone is going to hit Palm hard, a US analyst has forecast. Research in Motion's consumer-friendly BlackBerry Curve will harm the PDA pioneer too, Piper Jaffray wireless hardware analyst T Michael Walkley claimed this week.

There's an argument that all the iPhone hype will bring smart phones to the attention of buyers who might not otherwise have considered one, but Walkley doesn't reckon that's going to help Palm, according to a Barron's Online report. Quite the reverse: he claimed AT&T store staff are having a job selling the Treo 750 series.


"With the BlackBerry Curve ramping and iPhone launching June 29th at AT&T," Walkley wrote, "we view Treo as the most impacted by these launches and anticipate even further declines in sell-through trends.”


The new Windows Mobile challenger: Apple's iPhone vs Palm's Treo

Palm's recent announcement of the pricey Foleo - a kind of Bluetooth keyboard with a built-in screen, that's already being wickedly renamed the 'Faileo' - hasn't helped the company, once seen as the chief alternative to the array of Windows Mobile devices on the market. Apple's entry into the smart-phone market has, much more than Palm's decision to offer Windows Mobile-based Treos, grabbed that role from Palm.


With hype high, iPhone may have to fight a flop
Mon Jun 25, 2007 7:32 PM BST
By Franklin Paul
Link

NEW YORK (Reuters) - Not since Alexander Graham Bell has so much attention been lavished on a phone.

But the hype surrounding Apple Inc.'s media-playing iPhone could be a prelude to disappointment if it does not capture a wide market, technology veterans say.

As the press feeds the iPhone frenzy ahead of its U.S. launch on Friday, experts say the wireless device could easily top a long list of digital duds, all of them once touted as "The Next Big Thing."

"God himself could not design a device that could live up to all the hype that the iPhone has gotten," said David Platt, a computer science professor at Harvard University.

Since its existence was announced in January, more than 1 million people have told exclusive carrier AT&T that they are interested in a phone that costs as much as $600. In that time, Apple shares have risen 35 percent.

Comedian Conan O'Brien has spoofed it as the answer to all human needs, and rumor has it multimedia mogul Oprah Winfrey wants one. Blogs chronicle leaks about the phone like children plotting Santa's path from the North Pole.

"This is the most expected phone since Alexander Graham Bell's. Expectations are just off the charts," Jupiter Research analyst Michael Gartenberg said. "All anyone wants to talk about these days -- not just technology people, but mainstream consumers -- is the iPhone."

Apple is likely to sell a lot of phones on Friday, particularly as die-hard gadget fans angle for bragging rights to be among the first iPhone owners, he said. But the real test for Apple is whether it appeals to a mass market of consumers, not unlike the company's best-selling iPod music player.

"The ultimate success is how quickly Apple builds this into a family -- how quickly prices come down and models become more affordable," Gartenberg said. "It is what happens beyond the first 90 days that is really important."

Few people have actually seen an iPhone, whose main differentiating feature is a smooth glass touch screen that replaces number keys.

The device can surf the Internet, play music and video like an iPod, and perform other digital duties -- as well as make phone calls. Chief Executive Steve Jobs hopes Apple will ship 10 million in its first year.

SAME EMPEROR, NEW CLOTHES

To be sure, even the most pedestrian mobile phone can sell hundreds of thousands of units, in a phone market where some 1 billion units are sold each year around the globe.

The iPhone would be a replacement to products many people already have, forcing some users to switch mobile carriers and trade in devices with a full keyboard like the BlackBerry.

Unlike a new video-game console, high-definition DVD or flat-screen TV, the iPhone is relatively old technology with an attractive new package.

Platt, author of "Why Software Sucks...And What You Can Do About It," says the iPhone will likely miss the mark despite its cool look in TV commercials, because it was designed more to please engineers than a regular consumer.

"It is really easy to fall in love with a Playboy (magazine) centerfold when you are just looking at it," he said of the iPhone's flash.

"You can imagine iPhone will be the miracle box that solves all problems ... but when you actually have your hands on it and realize it takes five or six button presses to get something, then you start to get annoyed," he said.

Apple has not been immune to flops. After delivering the "Apple II" in 1977 -- its first popular microcomputer -- Steve Jobs' next project was "Lisa," a business computer labeled by many as late-arriving and expensive.

A $6,000, 20-pound Mac "Portable" met with a similar fate in 1989, followed by the Newton handheld device in 1993 and in 2000, the G4 Cube that critics said was a triumph of design over practicality.

IPhone isn't even Apple's first crack at a phone -- the ROKR, its collaboration in 2005 with Motorola , was critically panned and yielded disappointing sales.

More recently, handheld computer maker Palm Inc. stirred up talk about a genre-changing new device, only to unveil "Foleo" -- a mini-computer -- to a collective ho-hum from investors and gadget-watching blogs.

Still on the flop fence is Microsoft's Zune. Introduced last November as a potential iPod-killer, the digital music player is expected by the end of this month to sell a million total units, a fraction of iPod's business.

"What is a failure is often in the eye of the beholder," said Ross Rubin, an analyst at research firm NPD Group. "Even though the Zune is often considered a failure, Microsoft says it is happy with where the product is in the marketplace."


Some waiting on iPhone improvements before buying
Mon Jun 25, 2007 11:59PM BST
By Regan E. Doherty
Link

CHICAGO (Reuters) - Apple Inc.'s upcoming iPhone is shaping up as this year's must-have gadget, but several perceived shortcomings are pushing some potential buyers to wait for an updated version.

Worries over the high cost, slow network speed, and battery life are deterring some customers from ponying up a minimum of $499 for the device, despite the buzz across the gadget-crazed landscape of tech retail.

AT&T, the largest U.S. wireless provider, has an exclusive agreement to sell two version of the phone, priced at $499 and $599, in the United States under a two-year contract.

The new phone features a touch screen and combines the features of a cell phone, iPod, digital organizer and wireless Internet device. The phones will go on sale Friday evening at 6:00 p.m. local time across the United States in Apple and AT&T retail stores, as well as on Apple's Web site.

But the phone does not work on AT&T's fastest network, which runs on so-called 3-G technology. That, some said, will make Web-browsing slower than phones running on other networks.

Kate Rockwood, 24, a graduate student at Northwestern University, is shopping for a new phone as her contract with Verizon Communications Inc. (VZ.N: Quote, Profile, Research) expires this month.

"I really, really, really had my heart set on an iPhone," Rockwood said, citing the phone's much-touted Web capability as its most attractive feature.

But she said a desire for faster network speed, as well as longer battery life, will make her wait for a later version. She said she is wary of investing big money for service with questionable speed.

"To me, that's a $600 gamble," Rockwood said.

Phillip Kaplan, 29, a graduate student in Chicago with a background in graphic design, said he would not even consider buying the first version of the phone.

"The whole idea for me is to not even think about the first version," said Kaplan, who believes that many glitches will be discovered once consumers actually start using the product.

FIRST VERSION WORRIES

Another area of concern is whether the iPhone's on-screen keyboard will be as easy to use as Apple Chief Executive Steve Jobs claims. A wonky keyboard could turn off power users who write a lot of e-mail.

"Just like you don't buy the first model year of a car, you might not want to buy the first version of the iPhone," said Todd Dagres, a partner in Boston-based venture capital firm Spark Capital, which specializes in digital media and technology.

Dagres also said Apple has a track record of rolling out new, improved and cheaper models, such as the later versions of its iPod digital music and video players. Apple will likely do the same with iPhone, he said.

"Not many kids can carry a $500 phone, but a lot more would carry a $200 phone," Dagres said.

AT&T's network speed, however, poses no problem for Shaw Wu, an analyst with American Technology Research.

Wu said the iPhone's network and battery are competitive with what's already in the market. Apple says the phone will allow up to eight hours of talk time, six hours of Internet use and 24 hours of audio playback.

"So what if it doesn't run on 3G? Most other phones don't either," Wu said, adding: "The faster the network, the higher the cost."

Given the hype created by past Apple products that went on to become cultural icons, questions such as network speed and battery life may be moot, Wu said.

Some customers plan to camp out on Thursday night to ensure a place in line at stores. And on one popular Web community site, craigslist, customers unwilling to miss work on Friday were posting requests for people to stand in line for them.

"I'm sure Apple will sell every model they build," Wu said.


Behind the iPhone music
Stanley Sigman, CEO of AT&T's wireless operations, talks with Fortune's Stephanie Mehta about the decision not to sell the iPhone online, what he thinks about all the excitement, and more.

By Stephanie N. Mehta, Fortune senior writer
June 26 2007: 5:46 AM EDT
Link

(Fortune Magazine) -- Apple CEO Steve Jobs isn't the only executive girding himself for the iPhone's release June 29. Stanley Sigman, CEO of AT&T Mobility, has been getting his team ready for iPhone mania for months. Sigman, a wireless industry veteran who is credited with turning around Cingular (as AT&T's wireless unit was previously was known) five years ago, recently spoke with FORTUNE's Stephanie N. Mehta about his company's hot new device, AT&T's partnership with Apple (Charts, Fortune 500) -- and why the iPhone could be bigger than Caller ID. Here are excerpts from their conversation:

Q. You've worked in the U.S. wireless industry since its inception. Has there been an event that has generated as much consumer excitement as the iPhone launch?
A. I've never before experienced the kind of excitement that we have around this device. We've had other milestones in the industry that, looking back on them, were significant milestones, like the StarTac phone from Motorola (Charts, Fortune 500), the first small analog phone. I think of the RAZR phone, I think of the excitement that's been around the (Samsung) BlackJack, but I've never enjoyed the consumer excitement that we've seen around the iPhone.

Q. So it is bigger than the launch of Caller ID, which AT&T's predecessor company, SBC, got a huge percentage of its residential customers to buy.
A. Caller ID wasn't a big thing. A long time after it was launched, 99.5% of the customers still didn't know what it was. It wasn't until we started pushing it and word-of-mouth started getting around that it started to take off. Obviously, we don't have that issue with the iPhone. It isn't something that's going to slowly take off.

Q. How are you getting AT&T stores ready for June 29?
A. We saw this as a real opportunity to accelerate our brand transition from Cingular to AT&T (AT&T (Charts, Fortune 500) is phasing out the Cingular brand). We've spent hundreds and hundreds of hours in training in preparation of this, and we've hired thousands of incremental summer hires to handle the load.

Q. Are people going to be able to buy iPhones via the AT&T wireless website. Or is this a device they have to come into the stores to purchase?
A. Initially it won't be on the AT&T website. It will be in our 2,200 stores, in the Apple stores and on the Apple website.

Q. What was the thinking behind not putting it on the AT&T website immediately?
A. We eventually want to put it on our website, but we thought it would be a better experience to come in and touch it, feel it. And it would also give us an opportunity to showcase all of our other products.

Q. How do you feel about Apple's marketing of the iPhone: Some of the ads seem to suggest it is a multimedia player first and a communications device second. Does that chafe?
A. The intent of the advertising is just to show the breadth of products that's on the device. First and foremost, it's the best iPod that Apple has ever put out. It's an iPod that allows you to load your library of music from your iTunes to your phone. It is a great phone with great contact lists. It is a great Web browser experience. Its Google Maps capabilities are phenomenal. And there's the Visual Voicemail we developed with Apple: It will be the first where you pick the order in which you retrieve voicemail. I hope the advertising is depicting that it is more than a phone.

Q. What has AT&T influenced, if anything, on the iPhone: Where are your fingerprints on the device?
A. It was approaching three years ago when I first received a call from Steve and he shared with me what his vision was. I had not seen a phone and Steve had not held a phone. He had a vision of the phone at that time, and this (contractually obligating AT&T to deploy the iPhone) was in some respects a difficult decision to make because it required me to make a commitment to a device that I had not tested.

At the end of the day, I had confidence that Steve and his team had the capability to design hardware and develop software that would nail it, and I had confidence in our ability to work with them on the radio side and the technical side. We're not going to take credit for the concept, the hardware or the software. He did that. But we worked with them hand in hand in the testing process to make sure it was what he wanted it to be and what we wanted it to be.


Mike Wendland's blog / Detroit Free Press Online
Complaints already surfacing about iPhone availability
June 26, 2007
By Mike Wendland
Link

The iPhone isn't even being sold yet and already there are complaints about its availability.

Unless you visit an AT&T corporate store (there are 39 in Michigan, mostly in metro Detroit) or an Apple retail store (Troy, Novi and Grand Rapids), you're out of luck.
Wireless resellers, who normally can sell phones and contracts for many different carriers, are being shut out of the iPhone.
At one reseller I visited the other day, the clerk openly dissed the iPhone, noting that it works on AT&T's slower EDGE network, not the state-of-the-art high-speed 3G data network. He tried to move me to a Treo 750, which does work on 3G.

AT&T has not announced when it will make the iPhone available to its resellers.

Potential customers are also miffed at the policy. Reader Stacey Eschberger tells me: "I will be up in Traverse City on Friday and there aren't any AT&T stores! UGH! Have considered delaying my vacation for a day but my husband may kill me!" Apple will also sell the iPhone online, at apple.com, but not until 6 p.m. Friday. Meanwhile, Apple has whipped up even more excitement for the phone with a 20-minute online demonstration video that shows even more features of the sleek, all-screen all-pupose wireless gizmo and music player. It's enough to cause me to be standing in line at 6 p.m. Friday.


Apple takes risks in bid to shake up the mobile market
By Kevin Allison
Published: June 25 2007 18:22 | Last updated: June 25 2007 18:22
Link

When Steve Jobs introduced the iPhone at Apple’s annual Macworld trade show in January, he set a high bar for measuring the success of the new mobile handset.

“In 1984 we introduced the Macintosh. It didn’t just change Apple, it changed the whole computer industry,” the technology group’s chief executive said to raucous applause. “In 2001, we introduced the first iPod and it didn’t just change the way we all listen to music, it changed the entire music industry.”

“Today,” he told the swooning crowd, ”we are going to reinvent the phone.”

It was classic Jobs bravado. But the excitement surrounding the iPhone is hardly limited to the Macintosh faithful. In the eyes of its boosters, the iPhone seems destined to change the world. Freed from the shackles of the “baby software” that cripples most phones, the argument goes, iPhone users will become the first consumers in the world to gain full and unfettered access to the internet while on the move, as well as enjoying a simpler way to manage contacts, listen to music and make traditional calls.

On Friday, more than two years of anticipation will come to a head when the iPhone goes on sale in US stores, in what is sure to be one of the most closely-watched product launches of all time. It is expected to make its debut in Europe later this year and in Asia in 2008.

But is the iPhone truly a breakthrough device? Or is the frenzy around the iPhone launch just that – hot air amplified by clever marketing? As with any new Apple product, it is difficult to separate the hype from reality.

“If the chief executive of Nokia had stood up and said he was launching a phone that was big and heavy, had no keyboard, was only 2G and not available for six months, he would have been crucified,” says Ben Wood, an analyst at CCS Insight. “It is unique that Apple have been able to get away with that.”

The fact that Apple has chosen to make the iPhone run on a slower 2.5G radio rather than a faster 3G connection is just one of the issues that could cause the iPhone to hit a snag, at least in its first incarnation.

“The two obvious areas for improvement in this version of the iPhone are adding the 3G network and adding more memory,” says Charles Golvin, an analyst at Forrester Research. The lowest-priced iPhone has just four gigabytes of storage – far less than most video iPods.

At $499 for a basic iPhone handset, Apple is entering at the top end of the smart phone market. The iPod was priced at a similar premium to other music players when it arrived on the scene in 2001, but Apple was soon able to segment its market and offer stripped-down versions of the player to more price-sensitive consumers. Today, an iPod shuffle can be bought for less than $80. It may be difficult to achieve similar price flexibility with the iPhone.

“If Apple wants to bring the price down like they did with the iPod, they have to re-engineer the entire operating system from scratch,” says Richard Windsor, an analyst at Nomura.

The excitement around the iPhone stems from a simple fact: in spite of their increasing importance in our day-to-day lives, most mobile phones remain clunky, crammed with hard-to-use features, second-rate software and awkward keypads.

When it launched in 1984, the Macintosh was the first personal computer to abandon clumsy text commands in favour of a visual interface controlled by a computer mouse. The move made the world of computers accessible to the mainstream, setting a new standard for ease of use in computers that is still copied today.

To improve the user interface of mobile phones, Apple has done away with a fixed keyboard in favour of a touch-screen that allows button configurations to change depending on whether a user is making a phone call, viewing a picture or composing an e-mail message.

One of Apple’s chief breakthroughs with the iPod was to tie the new gadget closely to its iTunes music software, a move that made it easy for iPod customers to store and organise entire libraries of music. With the iPhone, Apple has sought to replace the dumbed-down software found on most smart phones with a fully-fledged operating system capable of supporting graphics and web browsing usually found only on desktop computers.

“It’s really about taking experiences and capabilities that have been here for a long time in most mobile phones and making them much, much better,” says Barry Jaruzelski, a consultant at Booz Allen Hamilton. “It’s basic innovation. Having observed over two decades how people interact with technology, Apple understand how to solve problems people don’t even articulate they have.”

While it may be tempting to view Apple’s entry into the handset market as a calculated move designed to cement its position as the world’s leading lifestyle brand, the reality may be more complex. The truth is that, in contemplating its next move after the iPod, Apple may have had little choice but to enter the mobile phone business.

“Apple almost had to do the iPhone,” says Mr Jaruzelski. With a 70 per cent share of the digital music market, it was just a matter of time before iPod sales growth started to even out.

For at least a year leading up to the iPhone’s debut in January, Wall Street analysts had been arguing that Apple would need to come up with several new blockbuster products in the same class as the iPod in order to justify the huge growth premium attached to the company’s stock price.

“Every consumer electronics category goes through a boom and a flattening out,” Mr Jaruzelski explains. “Apple had to add a new category to sustain their growth.”

Once the need to move beyond the iPod into new areas of revenue growth had been identified, mobile was an obvious choice. People around the world bought about 1bn mobile handsets last year, 10 times the number of iPods sold in the past six years combined.

The sheer size of the market means that if Apple hits its goal of capturing 1 per cent of the worldwide handset market next year, a number equivalent to about 10m handsets, it could result in billions of dollars in new sales.

Yet, in spite of its size, the mobile handset market is far from an ideal battleground. “It’s a much more brutal competitive set when you are taking on Motorola, Nokia and Samsung than when you compare it to the MP3 player folks Apple were competing with on the iPod,” says Mr Jaruzelski. “They’re going to focus intensely on a new entrant.”

Nokia’s N95 phone, the Upstage phone Samsung has created for Sprint, the HTC Touch phone launched only a few weeks ago and Sony Ericsson’s W960, launched earlier this month, are all potential iPhone competitors.

The mobile handset business is not only well established and stocked with big competitors, it also is driven largely by demands of network operators. “Here in the US, operators buy 90 per cent of the phones. As a result, they dictate what the experience is like. Mobile phone makers are really under the thumb of the operators,” says Mr Golvin.

This skewed power arrangement is at the heart of many consumers’ frustration with mobile phones, which are often tailored to meet the requirements of network operators rather than customers, according to Mr Golvin. In the past, with both the Macintosh and the iPod, Apple has tried to minimise technical glitches by managing every aspect of the user experience. That level of control will not be possible with the iPhone, which will rely on AT&T’s mobile network for service in the US.

“Their partnership with AT&T is a huge change for Apple,” Mr Golvin says. “To be so highly dependent on a partner is very different.” Still, he says: “I think consumers understand the difference between the handset and the network. It’s possible that because there is so much hope around the experience, if consumers get an inflated idea of the experience there’s some risk of disappointment.”

Although the details of the arrangement between Apple and AT&T remain unclear, many suspect that Apple has negotiated special concessions not granted to other handset makers, such as a share in the revenue from service fees and greater control over the iPhone’s feature set. “In this case, Apple is the one that’s calling the shots on the device,” says Hugues De La Vergne, an analyst at Gartner.

Apple’s special arrangement may signal an opportunity for other handset makers to try to secure more favourable terms from their network partners.

Mr Windsor at Nomura says AT&T’s willingness to cede control in order to do business with Apple could amount to a Pyrrhic victory. In other words, the balance of power between mobile operators and handset makers may have been irrevocably altered by the iPhone. “Nokia, Sony Ericsson and Samsung have been given carte blanche to continue pushing their brands through the user experience at the expense of the operator,” he says.

Others are not so sure. “There aren’t any other players out there who can exercise the kind of control and leverage in getting new products to market,” says Mr Golvin. “It’s not like this is a harbinger of changes that Motorola, Nokia and Samsung will be able to benefit from.”

For the network operators themselves, the iPhone could prove a double-edged sword, says Mr Wood of CCS Insight. Operators have been working for years to encourage more users to download ringtones, pictures and video over their mobile connections. But with the iPhone, users will be able to download all the content they want by synching their device with iTunes over a PC connection. “This will encourage side-loading of music content from the PC, rather than over the air. It is not as attractive to operators,” Mr Wood says.

Mr Wood says Nokia, which is understood to be planning to launch its own music service later this year, could pose the same challenge. “Manufacturers like Nokia and Apple are looking to get more revenues from services, but face a challenge in doing that without treading on operators’ toes,” he says.

For Apple, the potential benefits of capturing just 1 per cent of global handset sales are likely to outweigh the risks of entering a new and unfamiliar market.

Yet even if it were to carve out a 10 per cent share of the mobile phone market, the iPhone would remain a niche product more akin to the Macintosh than the iPod; significant, perhaps, to Apple and its shareholders, and a beautiful piece of technology, but far from the revolution in human affairs that some observers have made it out to be.

SILICON VALLEY REGAINS ITS FAITH IN THE SMALL-SCREEN WEB

Eric Schmidt, chief executive of Google, has taken to reciting the latest mantra of Silicon Valley. Asked recently what the next big opportunities would be for the search company, he echoed a word that seems suddenly to be on everyone’s lips: “Mobile, mobile, mobile,” Richard Waters reports from San Francisco.

The new enthusiasm of the Valley’s internet leaders echoes the hopes of media companies around the world, which are coming to see mobile handsets as vehicles for their own ambitions to grab the attention of more people, in more places and for more time.

This week’s launch of Apple’s iPhone has become a lightning rod for this latest burst of interest in mobile media consumption and internet access. Even if it remains a niche product sold in only small quantities, such is the power of Apple’s brand and presumed prowess in consumer technology that some see the iPhone as a catalyst for an entire industry.

“I am 100 per cent convinced it will be the change agent” for the mobile internet, says Marco Boerries, the executive in charge of Yahoo’s efforts to go mobile. Just as the Macintosh computer pioneered a new user interface that brought personal computing to the masses, so the iPhone will trigger a breakthrough in mobile computing, he adds.

The early history of the mobile internet, however, suggests that it would pay to be cautious. Eight years after NTT DoCoMo’s low-speed i-mode service first demonstrated there was a market for mobile internet access, and seven years after the auctions of “3G” spectrum touched off investment mania in Europe, more fortunes have been lost than made.

“The whole [mobile] industry in the last eight years has spent hundreds of billions of dollars to buy bandwidth, upgrade networks and subsidise handsets,” says Mr Boerries. “And what do people do? The same things they did eight years ago.”

That may be an exaggeration, but it is true that years of hype about the mobile internet have yielded little. Hopes that the habits of avid Japanese and South Korean mobile consumers would spill over to the rest of the world have not been fulfilled, and few services have turned into mass-market hits.

Ringtones provided a brief, but not lasting, flurry. Mobile games bring in €1.6bn (£1.1bn, $2.1bn) but that market is slowing and will reach only €2bn globally by 2011, according to Screen Digest, a research firm. Consumers never took to e-mailing pictures around from their cameraphones, something that mobile operators hoped would generate strong demand for mobile data services.

Other new services may face a similar fate. Downloading music direct to mobile handsets is likely to become only a €1.5bn market by 2011, predicts Screen Digest, as consumers take the cheaper route of “side-loading” songs onto mobiles from PCs.

Aside from SMS messaging (or “texting”), this has left an anaemic mobile data industry. In Europe, most carriers earn just $1-$2 a month per subscriber from these data services, according to Analysys Research (they earn another $3-$12 a month from texting). This is a mirror image of Japan, where carriers charge according to the amount of data they ship rather than by the message (text messages use little bandwidth).

What is worse, growth in wireless data revenues has largely evaporated. “Things have looked fairly flat for a lot of operators over the last couple of years,” including in the advanced markets of Japan and South Korea, says Alastair Brydon, at Analysys.

The arrival of the iPhone may be one catalyst, but it will take far more to transform today’s feeble mobile internet industry. Top of the list are services that work well enough on a small handset to draw a mass audience and new business models and forms of advertising capable of sustaining a substantial industry.

To some extent, the fortunes of the mobile industry are likely to continue to rest heavily on communication services. Just as texting has been the bright spot in recent years, mobile e-mail looks set to become a big new market. Beyond this, hopes rest broadly on two things.

One is that browsing from small handsets will finally become a worthwhile experience. Starting with WAP and continuing with the slow browsers and the unappealing “walled gardens” of services created by mobile operators, the technologies and services have been far from easy to use.

The big internet companies have contributed to this record. Early services, such as mobile search, were nothing more than copies of PC applications, admits Mr Boerries. Companies such as Yahoo and Google are racing to design services that are better suited to mobile phones, where space is at a premium and keyboards hard to use.

A partial change in strategy by mobile operators may help to stimulate this drive to create more suitable services. Starting in Europe, mobile operators are moving away from their walled gardens, giving users greater access to other internet services (though, fearful of being reduced to the position of nothing more than low-margin data carriers, most are treading carefully). They are also dropping their pay-by-the-bit pricing plans and applying flat-rate monthly charges for data, something that could encourage users to browse the mobile web more freely.

The other big hope is that the handset is about to become a form of portable television. Mobile television emerged in South Korea, but in recent months the first services in Europe to broadcast to handsets have attracted considerable interest. It is too early, though, to say whether such services will become big money-earners.

Current hopes rest heavily on the emergence of a mobile advertising business. Just as the early wired internet moved from being a subscription-based business to one relying largely on advertising, the same is now set to happen in the mobile world, says Jonathan Bulkeley, a former head of AOL in the UK and now head of mobile commerce company Scanbuy.

With the mobile advertising market worth less than $1bn last year, it may seem a stretch to think that this can become the foundation for a thriving industry. Yet the same might have been said of internet advertising in the mid-1990s.

AOL earned only $1 a year for each of its users in 1994, says Mr Bulkeley; by 2000, that had risen to $40. “In mobile, it’s like 1995 on the internet,” he says.