UPDATE 5-Apple unveils iPhone 4 to fend off Google

Mon Jun 7, 2010 8:37pm EDT

Related Topics

* iPhone 4 slimmer, faster, longer-lasting -- as expected

* More needed to raise the bar and wow investors

* A step forward but tough to fend off Google, rivals

* Shares off nearly 2 percent (Adds analyst's comments, updates with rivals' share action)

By Gabriel Madway and Alexei Oreskovic

SAN FRANCISCO, June 7 (Reuters) - Apple Inc (AAPL.O) unveiled a new iPhone on Monday that goes on sale in scores of countries this year, preparing its fastest-ever global roll-out to try and stay a step ahead of rivals like Google Inc (GOOG.O) in a red-hot smartphone market.

CEO Steve Jobs showed off a redesigned $199 "iPhone 4" that is a quarter slimmer than the current handset. The device boasts a higher quality screen and better battery life, video chat via Wi-Fi, and a gyroscope sensor for improved gaming.

A slim but energetic Jobs told a media and industry audience at Apple's annual developers' conference in San Francisco that the latest phone will be available June 24 in five countries, expanding to 18 by July and 88 by September in the quickest-ever international roll-out for an iPhone.

That signaled how serious Apple is about gaining traction abroad, where iPhone penetration is still relatively small.

Despite the iPad's success in its first two months on the market -- more than 2 million sold in 60 days -- the iPhone remains Apple's main growth line, and the international market is key. Some analysts estimate more than two-thirds of iPhone sales are now coming from overseas.

"It's really just a huge market unit opportunity abroad for the iPhone," Broadpoint Amtech analyst Brian Marshall said.

But many of the innovations on the iPhone 4 had been expected, and industry watchers say it is becoming more difficult to stand out in a crowded field.

Google's Android operating system -- used by many brands from Motorola Inc MOT.N and HTC Corp (2498.TW) to Samsung Electronics Co Ltd (005930.KS) and Dell Inc DELL.O -- poses the biggest threat, analysts say.

The iPhone's global share surged to more than 15 percent in the first quarter, making it No. 3 in smartphones. Phones based on Android ranked No. 4 with close to 10 percent of the market, a huge increase from the previous year and gaining, Gartner data shows. [ID:nLDE64I05D]

"There was nothing earth-shattering about what we saw or heard today," said CCS insight analyst John Jackson. "All of that said, you can't think it will be anything other than a phenomenal success."

Hudson Square Research analyst Daniel Ernst called the new device "more evolutionary than revolutionary."

"It doesn't completely change the paradigm for the iPhone," he said. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

(Graphic showing iPhone sales: here)

Live Blog: here

Instant view [ID:nN07206568] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

GOLD STANDARD

Still, Jobs argued the fourth-generation iPhone -- which for the first time sports the same A4 processor that powers the iPad -- marks the biggest technological leap since the first model debuted and set the standard.

"This is beyond a doubt the most precise thing and one of the most beautiful things we've ever made," Jobs said.

Apple's CEO displayed all of his famed skills as a pitchman, mixing wry wit with an obvious passion for Apple's products. He even joked about the iPhone prototype that fell into the hands of Gizmodo, which spilled many of its secrets.

Although the iPhone remains Apple's main growth driver, the iPad has stolen some of its thunder. With the early success of the tablet computer, Apple's stock has gained around 20 percent this year, overtaking Microsoft Corp (MSFT.O) to become the world's most valuable technology company. [ID:nN03268178]

Apple's shares fell 2 percent to close at $250.94 on the Nasdaq. Google shares fell 2.7 percent, while Research in Motion Ltd RIMM.O dropped 5.2 percent.

Rodman & Renshaw analyst Ashok Kumar noted that investors are likely waiting for Apple to expand its iPhone distribution to U.S. carriers beyond AT&T (T.N) before getting excited.

"The next big event is going to be Verizon (VZ.N). It's a guessing game whether it will be late 2010 or early 2011," he said.

For now, the new device should be more profitable, given price and hardware specifications, Marshall said.

"I feel like we're going to see gross margins expand here on the iPhone," he said.

The iPhone -- introduced in 2007 with the touchscreen, on-demand application template now adopted by its rivals -- remains the gold standard in the fast-growing smartphone market.

Apple sold a record 8.75 million iPhones in its latest quarter, accounting for 40 percent of its revenue. With margins estimated at 60 percent, it is Apple's prime growth driver, helping margins climb to a record 41.7 percent in the most recent quarter from 34 percent in fiscal 2007.

Only last year, Research in Motion Ltd RIM.TO was seen as Apple's top rival. While the company's BlackBerry remains the smartphone of choice for many corporations that need fast email, Apple has made strides in that market.[ID:nTOE64G06A]

Analysts said the latest iPhone incorporates new security features obviously targeted at business customers.

Apple's prime target remains the consumer. But there, new competitors are designing high-powered handsets based on Google's Android software, offering fast, web-surfing and video-enabled phones with access to thousands of apps.

Interpret analyst Michael Gartenberg said that the newest iPhone will manage to exert pressure on Google and rival handset-makers.

"It's much more complete, much more adept in terms of the polish and delivery and it's going to force the other competitors to up their game," he said. (Additional reporting by Sinead Carew, Jennifer Saba and Paul Thomasch in New York) (Editing by Edwin Chan, Gerald E. McCormick and Carol Bishopric)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.