Hello iPhone, Goodbye Cell Phone?

Ending months of furious speculation and breathless anticipation from devotees, Apple (Nasdaq: AAPL) CEO Steve Jobs unveiled two products the company hopes can extend his company's iPod success streak during 2007 -- an iPhone mobile device and a high-definition set top box.

The iPhone, which combines the iPod digital music player with an Apple-designed mobile phone, has been rumored to be in the works for more than a year.

'Making History'

The device Jobs unveiled at the Macworld Conference & Expo, the company's annual new product showcase, features touch-screen functionality -- it does not have a traditional keypad. It also has built-in WiFi, Bluetooth connectivity and Web-surfing features borrowed from the Mac interface.

"We are making history here today," Jobs said. "This is a day I've been looking forward to for two and a half years. Every once in a while a revolutionary product comes along that changes everything."

Along with the phone, Jobs unveiled a refined and renamed device now known as "Apple TV." The set-top box is capable of displaying Internet-based media on traditional televisions and can connect to PCs and the Internet through WiFi networks. Jobs previewed the device, previously known as "iTV," last fall.

The rollout ignited a fresh round of buying of Apple shares, sending the stock higher by nearly 7 percent in afternoon trading Tuesday to US$91.18.

Apple is eager to retrain media focus on its new products and plans for the new year -- and away from the furor over options backdating that has dogged it for much of 2006, even provoking speculation that Jobs could be forced to depart the company he helped found.

Calling the Future

Jobs said Apple starts 2007 in its strongest state ever, having garnered huge sales increases of its Mac computers in 2006, when half of all the computers it sold were to first-time Apple buyers. He also disputed reports that sales at the iTunes Music Store were slowing, and announced a deal with Paramount to distribute its films via iTunes.

However, Jobs spent the bulk of the keynote speech focusing on the iPhone, which he said is in fact three "revolutionary devices" in one: a widescreen iPod with touch-screen controls, a mobile phone with advanced capabilities and a mobile "Internet communications device."

"Today Apple is going to reinvent the phone," he said, by improving on the Web-surfing functionality of mobile devices. Smartphones, Jobs continued, offer "the baby Internet," with tiny screens and limited functionality.

"We want to do a leapfrog product that's way smarter than these phones and much easier to use," he noted. Apple has advanced -- and patented -- touch-point technology that will eliminate unintended commands and can handle typing with more than two fingers without jamming up, he added.

The iPhone is in essence a shrunken Mac computer, running on the new OS X operating system. When connected to a computer, it automatically synchronizes with iTunes libraries, as well as other applications such as e-mail , calendars and Web bookmarks in the Safari browser.

Despite its advanced functionality, the iPhone will be thinner than most current smartphones, at 11.6 millimeters. The phone has a built-in digital camera on the back and a connector dock for iPods. Jobs said the goal of iPhone designers was to make it easier to make calls on the phone. "The killer app" for mobile devices "is making calls," he said. "It's amazing how hard it is to make calls on today's phones."

Cingular will provide service for the iPhone at the outset and the phones will have a relatively large price tag, starting at $499 when they become available in June.

Apple Does TV

The Apple TV will use a variety of connectivity options to deliver media to TVs and other devices, including USB, traditional audio-video cables and the 802.11n WiFi standard. The device will have a 40 GB hard drive -- enough for 50 hours of video and comparable to the current generation of TiVo (Nasdaq: TIVO) DVR devices -- and will be capable of displaying high-definition images.

Like the new line of Macintosh computers, the Apple TV will feature Intel (Nasdaq: INTC) processors, Jobs said. Users can send video to as many as five different TVs from a single box.

Jobs said the Apple TV, which can handle video from both Mac and PC platforms, will start shipping next month and that Apple would begin taking orders on its Web site immediately.

New Name, New Markets

Jobs also announced that Apple would formally change its name from "Apple Computer" to "Apple Inc.," reflecting the company's future as a consumer electronics company.

The iPhone drew the most attention from observers, in part because the TV box had been debuted already, and in part because mobile phones represent an enormous market opportunity. Some 1 billion handsets were sold during 2006 alone.

While Apple is late with its cell phone, it has proven in the past that it can still become a dominant market force even as a late-comer, JupiterResearch analyst Michael Gartenberg noted. Apple believes it can sell 12 million iPhones within a year.

"People forget that Apple was not first to market with the iPod either. There were a lot of other folks with devices in the market," Gartenberg stated.

He also noted that the technology in the iPhone was not possible just two years ago and that Apple always believes it can stand an industry on its ear with innovative design.

"Enough people will buy them that it will be a success," he added. "Like the iPod, don't think that Apple is going to stop with one model in this line."

It will be interesting to see how competitors to respond to the iPhone, something they couldn't do as long as the phone was simply a rumor. With 230 million phones sold in the United States last year, Apple's new device will likely not have a significant impact on the mobile device industry.

"Several million iPhones will be great news for Apple, but I don't think at this point it will make a big difference to the industry competitors," telecom analyst Jeff Kagan told MacNewsWorld.