Apple Computer CEO Steve Jobs on Tuesday announced the iPod maker's long-awaited leap into the mobile phone business and renamed the company to just "Apple Inc," reflecting its increased focus on consumer electronics.
The iPhone, which will start at US$499 when it launches in June, is controlled by touch, plays music, surfs the Internet and runs the Macintosh computer operating system. Jobs said it will "reinvent" wireless communications and "leapfrog" past the current generation of smart phones.
"Every once in a while a revolutionary product comes along that changes everything," he said during his keynote address at the annual Macworld Conference and Expo. "It's very fortunate if you can work on just one of these in your career ... Apple's been very fortunate in that it's introduced a few of these."
PHOTO: AP
He said the company's name change is meant to reflect Apple's transformation from a computer manufacturer to a full-fledged consumer electronics company.
During his speech, Jobs also unveiled a TV set-top box that allows people to send video from their computers and announced the number of songs sold on its iTunes Music Store has topped 2 billion.
Apple shares jumped more than 8 percent on the announcements, while the stock of rival smart-phone makers plunged. The run on Apple stock created about US$6 billion in shareholder wealth.
While Jobs noted the explosive growth of the cell phone market, it is not clear that a device as alluring as the iPhone poses a threat to mainstream handset makers due to the price, said Avi Greengart, mobile device analyst for the research firm Current Analysis.
"My initial reaction is that this product actually lives up to the extensive hype, and I'm not easily impressed," he said. "But the vast majority of phones sold cost way less than US$500."
Instead, the rivals most likely to face new competition from Apple's handset are makers of higher-end smart phones such as Palm Inc.
Tim Bajarin, principal analyst with Creative Strategies, said the iPhone could revolutionize the way cell phones are designed and sold.
"This goes beyond smart phones and should be given its own category called `brilliant' phones," he said. "Cell phones are on track to become the largest platform for digital music playback and Apple needed to make this move to help defend their iPod franchise as well as extend it beyond a dedicated music environment."
Apple currently commands about 75 percent of the market for downloaded music and portable music players. But it is expected to lose market share on both fronts as rivals introduce their own gadgets and music stores.
Jobs said Apple expects to sell 10 million iPhones next year, the first full year in which they will be available. That is about 1 percent of the global market for mobile phones. More than 950 million were sold worldwide last year.
The Apple phones, which will operate exclusively on AT&T Inc's Cingular Wireless network, will start shipping in June. A 4 gigabyte model will cost US$499, while an 8 gigabyte iPhone will be US$599. While wireless carriers typically offer discounts and rebates on new devices when they agree to sign a two-year service contact, Cingular said it was unclear whether this would be the case with the iPhone.
IPhone is less than 1.3cm thin -- less than almost any phone on the market today. It comes with a 2-megapixel digital camera built into the back, as well as a slot for headphones and a SIM card.
The phone automatically synchs the user's media -- movies, music, photos -- through iTunes on computers running either Mac OS X or Microsoft Corp's Windows. The device also synchs e-mail, Web bookmarks and nearly any type of digital content stored on a PC.
"It's just like an iPod," Jobs said, "charge and synch."
To make a call, users can tap out the number on an onscreen keypad or scroll through their contacts and dial with a single touch.
Apple is also introducing what it calls "visual voicemail," so users can jump to the most important messages rather than have to listen to all of them in order.
The phone supports Wi-Fi and Bluetooth wireless technology and can detect location from Global Positioning System satellites. It also can send and display e-mail and text messages. Apple is part-nering with Yahoo Inc on Web e-mail and Google Inc on maps.
With a few finger taps, Jobs demonstrated how to pull up a Google Maps site and find the closest Starbucks to San Francisco's Moscone Center, where Macworld is held.
He then prank-called the cafe and ordered 4,000 lattes to go before quickly hanging up.
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