June 29, 2007 / 4:05 AM / in 10 years

iPhone sellers open doors, greeted by cheers

<p>Surrounded by cheering Apple Store employees, one of the first iPhone buyers leaves the store on Fifth Avenue in New York, June 29, 2007.Jeff Zelevansky</p>

SAN FRANCISCO/NEW YORK (Reuters) - Hundreds of gadget fans, or their paid stand-ins, lined up on Friday to be the first buyers of Apple Inc.'s iPhone, a music and video playing phone expected to reshape the mobile industry.

Apple stores became magnets for technology enthusiasts who waited for the phones to go on sale at 6 p.m. local time in each U.S. time zone.

More than 600 people were lined up at two Apple stores in New York, and the crowd cheered at one of them as the doors opened. Smaller groups of several dozen customers waited outside AT&T stores. AT&T Inc. is the phone's exclusive wireless carrier for the next two years.

About 200 people stood outside a San Francisco outlet for a device that has whipped technology lovers into a frenzy usually associated with the launch of a new video game console.

"The phones out there are just garbage. I've gone through several phones, even the expensive ones. This is different," said Albert Livingstone, 62, in Chicago. "It's the newest toy. I'm 62 -- I don't have much time left to buy toys."

The iPhone melds a phone, Web browser and media player. Technology gurus praised it as a "breakthrough" device, but questioned whether users would have a hard time with its smooth touch-screen, instead of a keyboard, and pokey Internet link.

The svelte gadget is a gamble by Apple co-founder and Chief Executive Steve Jobs to build upon the company's best-selling iPod music player and expand the market for its software and media services.

Apple aims to sell 10 million iPhones in 2008, which would amount to a 1 percent share of the global market. It has not given a goal for the device's launch, but some analysts said it could sell up to 400,000 units in the first few days.

"They want to extend the dominance they have in terms of their ability to create really elegant hardware and software integration," said Mark McGuire, analyst with research firm Gartner. "This is the next big business unit for them."

Shares in Apple rose 1.2 percent to $122.04 and have gained more than 30 percent since Jobs unveiled the phone in January. AT&T shares rose 1.9 percent to $41.50.

Many analysts say Apple stock could climb as much as 30 percent again in the coming year if the phone catches on, but some cautioned that the shares are already richly valued because of the high expectations.

"Apple shares have already benefited from a powerful hype cycle," Cowen & Co. analyst Arnie Berman wrote in a report.

Rival Phone Makers Feel Heat

<p>B.Q. Nguyen (R) takes a photo of Jason Rappaport with the new iPhone inside the Apple Store in New York, June 29, 2007. Hundreds lined up on Friday outside the Apple store hours before the iPhone, a combination widescreen iPod, cellphone and pocket Internet device, went on sale at Apple's 164 stores and nearly 1,800 AT&amp;T stores.Shannon Stapleton</p>

Friday's launch is also viewed as a test of wider U.S. demand for advanced phones, which have already caught on in parts of Asia and elsewhere.

Judging by its first customers, the phone seemed to draw an older generation of gadget geeks rather than young fans who may have been put off by the price, including a required service contract that starts at about $1,400 for two years.

Some aimed to make a personal profit from the iPhone, which costs up to $600, by selling it or getting paid to wait.

"I'm definitely a mercenary," said Kyle Laurentine in San Francisco. "I am 17 years old and I don't need an iPhone. I have an iPod and a cell phone. Together they do the same thing."

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Apple is expected to sell the iPhone in Europe later this year in the run up to the holiday season. It has not disclosed the price or carrier, though speculation has mounted it may reach a deal with Britain's Vodafone Group Plc.

Sales in Asia are expected to begin sometime in 2008.

But the iPhone's effect has rippled through the wireless industry before even a single unit has been sold.

Rival Palm Inc. has said the iPhone could hurt demand for its Treo smartphone, at least in the short-term.

"It's likely that as people try (the iPhone) out, there may be some stall in our sell-through," Palm Chief Executive Ed Colligan told Reuters on Thursday.

What is less clear is whether sales will hold up once the initial excitement has waned.

Piper Jaffray said this month Apple could sell 45 million units in 2009, putting the iPhone on par in terms of revenue with its two key businesses, the Macintosh computer and iPod.

Pacific Crest analyst Andy Hargreaves raised his revenue estimates for Apple due to his belief that Apple had ample supply of iPhones to meet initial demand.

"We believe the company is positioned to add new digital media services that could add over $1 billion in annualized revenue at an above-average margin," Hargreaves wrote.

Additional reporting by Sinead Carew and Robert MacMillan in New York, Regan E. Doherty in Chicago, Eric Auchard in San Francisco

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