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Apple unveils cheaper iPhone

Starting at $199, the upgraded device offers faster Web surfing.

June 10, 2008|Michelle Quinn | Times Staff Writer

SAN FRANCISCO — Apple Inc. is giving iPhone customers more for less.

Chief Executive Steve Jobs on Monday unveiled new versions of the iPhone that are lighter and thinner at the edges, feature much faster Web surfing and cost $200 less than the current models.

The iPhone 3G, named for the so-called third-generation network it will run on, goes on sale July 11 for $199 or $299, depending on the storage capacity. Thanks to heavy subsidies by Apple's U.S. wireless partner, AT&T Inc., the newer iPhone will cost one-third the price of the original version that hit the market a year ago this month.

Analysts said the price cut would spur sales of the iPhone despite the nation's economic slump.

"Price is the big surprise," said Mike McGuire, an analyst with research firm Gartner Inc. "If anyone needed proof that Apple wanted to go after a broader market, they have it now."

Owners of the current iPhone also get an upgrade. On the same day the iPhone 3G goes on sale, Apple plans to update existing devices to the same software, called iPhone 2.0. It will include features such as the ability to move and delete multiple e-mail messages, search for contacts and enable parental control restrictions.

The new software also will let existing iPhones run Microsoft Corp.'s Exchange e-mail service, which will put Apple in more direct competition with BlackBerry maker Research in Motion Ltd.

But it won't include some features that Apple fans had been clamoring for, including a video camera and the ability to cut and paste text to save time typing.

Switching to AT&T's faster network for the iPhone 3G should help Apple address another major criticism of its combination cellphone, Internet gadget and portable media player: It is a great Web-surfing device when within range of an open Wi-Fi connection but brutally slow when on AT&T's standard cellular network, Edge.

AT&T's 3G network is almost three times as fast as Edge, Jobs said before a cheering crowd of 5,200 at the Apple developer conference in San Francisco. Loading a page from the National Geographic website took 59 seconds on the Edge network and only 21 seconds on the 3G version.

"It's amazingly zippy," Jobs said.

The iPhone 3G also has a built-in global positioning system, which he said would lead to new services that target users by location. Jobs also said the new device has better battery life than the previous ones: five hours of talking (10 hours when talking on the slower network), six hours of Web browsing, seven hours of video or 24 hours of audio.

Also July 11, Apple will launch the App Store, which will sell iPhone games and other software from developers outside Apple. Jobs showed off some of the programs that the 4,000 coders chosen for the App Store had created.

Internet company Six Apart Ltd. demonstrated how to do live posts on its TypePad blogging service. A company called Loopt Inc. showed how iPhone users could meld a social networking service with a map to find out which friends were within 10 miles of them. Major League Baseball showed what it had created specifically for the iPhone: nearly real-time tracking of baseball games, including video highlights.

At the App Store, developers get to set the price of their software (including free, if they want) and keep 70% of the revenue. Apple won't charge them for credit card or hosting fees.

With the marketing slogan, "twice as fast, half the price," the iPhone, which is currently available for sale in six countries, will be sold in 70 countries before the end of the year, Jobs said. Apple has sold 6 million of the devices and is on track to reach its goal of selling 10 million by the end of 2008.

But the biggest news for consumers was the price drop, said Tim Bajarin, president of Creative Strategies Inc., a high-tech research and consulting firm.

He and other analysts had expected Apple to continue to follow its iPod playbook for introducing models: sell the new one at a premium and slash prices on the older versions.

But that wouldn't fly in this case, Bajarin said. Consumers suffering through rising prices for gasoline, food and other items wouldn't been keen on spending $399 or $499 on a cellphone.

"My suspicion is that Apple understood it had a revolutionary product and had to move quickly to stop competitors from coming in and expanding in their market potential," he said.

Apple will charge $199 for an iPhone 3G with 8 gigabytes of storage and $299 for one with double the capacity. The Cupertino, Calif.-based company could do so because AT&T is now following the wireless industry's usual practice of subsidizing the price of handsets to win more customers.

Apple said in a regulatory filing Monday that it would no longer collect fees from carriers -- essentially a share of the customer's monthly service fee.

To offset the subsidy, AT&T said it planned to raise the price of its cheapest data plan for iPhone 3G customers. Still, the telecommunications giant said it would take a near-term hit on its profit.

It expects to make up for it in the long run by putting the iPhone in more customers' hands.

Apple shares fell $4.03, or 2%, to $181.61. AT&T fell 65 cents, or 1.7%, to $37.56.

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michelle.quinn@latimes.com

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(BEGIN TEXT OF INFOBOX)

New numbers

*--* Original iPhone 3G iPhone Price $399-$499 $199-$299 Weight 4.8 ounces 4.7 ounces Thickness 46 inch 48 inch Network Edge (AT&T) 3G (AT&T) GPS mapping Not included Built in Standby time Up to 250 hours Up to 300 hours Talk time Up to 8 hours Up to 10 hours Microsoft exchange e-mail support No Yes *--*

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