Netflix to launch Apple iPhone app this summer

Netflix CEO Reed Hastings speaks during the unveiling of the iPhone 4 by Apple CEO Steve Jobs at the Apple Worldwide Developers Conference in San Francisco, California June 7, 2010.

SAN FRANCISCO (Reuters) - DVD rental service Netflix Inc on Monday jumped on the iPhone wagon by announcing it would release a free application this summer for the popular Apple Inc handset.

Netflix shares rose 2.5 pct before paring gains to trade at $110.14, up 0.33 percent, after announcing the application at an Apple conference where the technology company was widely expected to introduce its latest iPhone.

"With the success of the iPhone, everyone wants to be a part of it. Netflix had to do it," said Edward Woo, analyst with Wedbush Morgan Securities, who attributed the stock's rally to the "hype" surrounding the announcement.

Nevertheless, Woo believes the majority of Netflix subscribers will still prefer to watch movies and TV programs on computer screens or television sets.

"The iPhone screens are too small. I don't think there will be a mass adoption," he said.

Apple Chief Executive Steve Jobs is slated to take the stage later on Monday at Apple's annual developers' conference in San Francisco, where he is expected to offer the first glimpse of a fourth-generation handset.

Few are expecting major technological advancements from the current model, known as the 3GS. The new iPhone is expected to be faster, sport a front-facing camera for videoconferencing, boast longer battery life and a better screen.

The iPhone has been a huge success since it debuted in 2007, boosting Apple's margins, transforming the company into one of the world's leading mobile device makers and setting the competitive landscape in a smartphone battle that will play out for years.

(Reporting by Sue Zeidler; Editing by Richard Chang)