High-end wireless vulnerable to Apple iPhone

NEW YORK (Reuters) - Apple Computer Inc.'s new superslim iPhone with a buttonless touch-screen will pose a challenge to high-end cell phones, but its initial pricing will give rivals some breathing room, analysts said.

Apple said on Tuesday it will begin shipping the new gadget, which combines a mobile phone with Internet, e-mail, music, pictures and video, in the United States in June. An 8-gigabyte model will cost $599 and a 4-gigabyte model $499.

Chief Executive Steve Jobs said Apple, which has an exclusive agreement with No. 1 U.S. cellular operator Cingular Wireless, could sell 10 million iPhones in 2008.

The news pushed up Apple's shares, but roiled the stocks of handheld gadget makers like Research In Motion Ltd. (RIM) and Palm Inc..

The iPhone takes aim at high-end cell phones from Motorola Inc., Nokia Oyj, Samsung Electronics Ltd. and Sony Ericsson, and dampens the prospects of RIM's Blackberry or Palm's Treo in the wider consumer market.

"This (iPhone) does have the potential to shake up the competitive landscape even if it's not a device that's targeted to mass consumers," said Michael Nelson, analyst at Stanford Group. "It's clearly targeted toward the highest-value subscribers and they are the most profitable subscribers."

Much will depend on how fast Apple cuts prices, or whether Cingular assumes some of the cost when people sign on to their service. Neither company would comment on future pricing.

Cingular may offer to offset that cost in six to 12 months, judging by the example of other phone launches, Nelson said.

Apple could sell between 3 million and 5 million iPhones in its first year out, according to some analysts.

"It makes the high-end much more crowded," said Roger Entner, an analyst at Ovum. "That would primarily impact the likes of Samsung, LG and Motorola."

Apple shares gained 8.3 percent to $92.57 after the announcement, while RIM shed 7.9 percent and Palm fell 5.7 percent. Motorola lost 1.8 percent and Nokia fell 1.3 percent in New York trade.

In the wireless carrier market, companies more vulnerable to Cingular's relationship with Apple include Verizon Wireless and T-Mobile, analysts said. Cingular is owned by AT&T Inc., Verizon Wireless is a venture of Verizon Communications Inc. and Vodafone Group Plc. T-Mobile USA is owned by Deutsche Telekom AG.

"I think without a doubt Verizon is the one that is the most at risk with its VCast music model," said Albert Lin of American Technology Research. "It would've never allowed an Apple relationship to come to fruition."

The iPhone is 11.6 millimeters thick with a 3.5-inch glassy touchscreen, thinner than models such as the 13.7-mm Nokia N76 phone, unveiled by the world's largest cellphone maker this week, and Motorola's 14-mm RAZR.

Ed Snyder, an analyst at Charter Equity Research, said the iPhone's sleek design would have to be matched by durability.

"Phones take a beating" in backpacks or back pockets, he said. "When your phone fails you don't blame the phone manufacturer, you blame the carrier."

Sprint Nextel Corp. Senior Vice President Atish Gude, a senior executive in the company's mobile broadband group, was open-minded about the iPhone's potential success.

"The success of Apple has always been its simplicity. Putting something in a phone is very hard. To the extent that they can solve the simplicity hurdle, we all should learn something from that," he said.

(Additional reporting by Ritsuko Ando in New York and Lucas van Grinsven and Sinead Carew in Las Vegas)