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APPLE'S NEW DEVICES

IPhone sets menacing tone for competition

Although rivals appear unfazed, analysts say Apple will win a big share of the market.

January 10, 2007|James S. Granelli | Times Staff Writer

The sleek iPhone will shake up the wireless industry and force manufacturers to come up with more user-friendly handsets, industry analysts said Tuesday after Apple Computer Inc. showed off its highly anticipated mobile phone.

The handset, to be launched in June by Apple and Cingular Wireless, has a plethora of features that challenge the way handset makers are building so-called smart phones. A frequent refrain among analysts Tuesday was that the iPhone will set a high bar for customer expectations.

"Competition has just heated up," said Seamus McAteer, an analyst at M:Metrics Inc., a mobile market research firm.

At least on the surface, cellphone makers seemed unfazed by Apple's entry into a crowded and competitive market.

"Welcome to the market and thanks for providing another proof point validating our long-held vision for converged connected devices," said William Plummer, spokesman for Finnish handset maker Nokia Corp.

Nokia was among a number of manufacturers to introduce a slew of powerful cellphones at the Consumer Electronics Show in Las Vegas this week. The company embraces an open system that allows customers to take advantage of all of a handset's features, even if they don't lead to more revenue for the carrier.

Cellphone companies have long controlled what features to enable, charging customers incremental amounts for each one. But that model is breaking down as Sprint Nextel Corp. and T-Mobile USA move toward the Nokia model.

Initially, the iPhone won't be on a high-speed cellular network, Sprint spokeswoman Kathleen Dunleavy noted, and Apple will control what customers are able to do.

That means the handset won't get the capability to stream TV programs that, for instance, Verizon Wireless' phones have. Instead, Apple customers will have to download videos from the iTunes online store before transferring them to iPhones.

Although Apple faces a lot of challenges, such as the phone's high prices and the controlled system, it should capture a profitable chunk of the market, analysts said. That makes it a big win for Atlanta-based Cingular, the nation's largest cellphone carrier, they said.

Although Apple's announcement was widely expected, it still had an immediate effect on Wall Street.

As Apple Chief Executive Steve Jobs spoke about other products at the Macworld conference in San Francisco, analyst Rob Enderle noticed that the company's shares were falling. But as soon as Jobs announced the iPhone, the stock shot up, he said. It gained $7.10 to $92.57.

BlackBerry maker Research in Motion Ltd. lost $11.16, or 7.85%, to $131; Treo maker Palm Inc. dropped 84 cents to $13.92.

"Those are the two that could lose the most because they're narrowly focused on the premium handset market," McAteer said, "and the iPhone is definitely a premium device."

Two other companies that could feel the heat from the iPhone, analysts said, are Helio and Amp'd Mobile, both of which sell to the young and tech-savvy market -- those enamored with iPods and the latest gadgets.

Forrester Research analyst Charles Golvin sees iPhones also appealing to the business community that has long been addicted to BlackBerrys.

"When I'm around people who have more spending power, I see a lot more Apple products there," he said. "Those kind of executives are willing to spend for a better product, especially for one that reflects on them."

Among the features of the iPhone are a touch-screen, e-mail service similar to ones for BlackBerrys and Treos, easy conference calling and visual voicemail that enables users to see which ones they want to hear.

Apple and Cingular joined together two years ago on the Rokr cellphone, which Enderle described as a "train wreck." The effort was plagued, analysts said, by a number of conflicts, including Cingular's desire to charge more for music downloads.

This time, Cingular spokesman Mark Siegel said, Apple will have control over the phone features and Cingular has exclusive rights to the iPhone in the U.S. in a "multiyear" agreement.

For Apple, the move into the phone market was needed because carriers were eating into its iPod market with music-enabled phones, said analyst Linda Barrabee at Yankee Group.

Besides, she said, "the global phone business is going to be a much bigger business for Apple."

james.granelli@latimes.com

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(BEGIN TEXT OF INFOBOX)

Who benefits ... and who may not

Apple's new iPhone could prove to be a boon to some companies but may challenge makers of cellphones and hand-held computers.

Likely Winners

AT&T Inc.: Its Cingular Wireless network will be the exclusive carrier for the iPhone.

Cisco Systems Inc: It owns the rights to the iPhone name.

Google Inc.: Its maps will be built in.

Yahoo Inc.: Its e-mail application will be built in.

Threatened

Research in Motion Ltd.: Shares of the BlackBerry maker dropped 7.9% on Tuesday.

Palm Inc.: The maker of the Treo smart phone saw its stock drop 5.7% on Tuesday.

Motorola Inc.: Shares of the manufacturer of such phones as the Razr fell 1.8% on Tuesday.

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Source: Times research

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