By Scott Hillis
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 U.S.
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 is
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.
EYES ON NOKIA, RIM, PALM
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.
(Additional reporting by Sinead Carew in New York and
Georgina Prodhan in Berlin; Editing by Braden Reddall)
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