By Scott Hillis and Sinead Carew
Thousands of U.S. gadget fans flocked to stores on Friday to be the
first buyers of Apple's iPhone, a music-playing and Web-browsing
device expected to shake up the mobile industry.
Crowds lined up at some of Apple's outlets cheered as their doors
opened at 6 p.m. local time, while smaller groups waited outside AT&T
stores. AT&T Inc. is the phone's exclusive wireless carrier for the
first two years.
"I haven't slept in a day and a half," said Grant Johnson, 41, an
accountant from Brooklyn who was one of the first to walk out of
Apple's Fifth Avenue outlet clutching the prize. "I need a nice hot
shower and a bath."
Early hitches included a hiccup in AT&T's retail computer system that
delayed some East Coast sales for 45 minutes, and a sluggish response
on Apple's online store shortly after it began offering iPhones at
6:00 p.m. Pacific time.
The iPhone melds a phone, Web browser and media player, and costs $500
to $600, depending on memory capacity. Technology gurus praised it as
a "breakthrough" device, but questioned whether users would be unhappy
with shortcomings such as its lack of a hardware keyboard and pokey
Internet link.
The light, svelte gadget is a gamble by Apple Inc. co-founder and
Chief Executive Steve Jobs to build upon his company's best-selling
iPod music player and expand the market for its software and media
services.
"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."
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 sales goal
for the launch, but some analysts said it could sell up to 400,000
units in the first few days.
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 iPhones in
2009, which would put it on par in terms of revenue with its two key
businesses, the Mac computer and the iPod.
Many analysts say Apple's share price could rise 30 percent in the
coming year if the phone catches on, but some cautioned that the
shares are already richly valued.
"Apple shares have already benefited from a powerful hype cycle,"
Cowen & Co. analyst Arnie Berman wrote in a report.
Shares of Apple rose 1.2 percent to $122.04 on Friday and have gained
more than 30 percent since Jobs unveiled the phone in January. AT&T
shares rose 1.9 percent to $41.50.
SHAKING UP THE INDUSTRY
Talk of the iPhone rippled through the wireless industry before even a
single unit had sold.
Ed Colligan, chief executive of rival Palm Inc., told Reuters on
Thursday that sales of its Treo smartphone could "stall" in the short
term as people try out the iPhone.
Apple is due to sell it in Europe in the run up to this year's holiday
season. It has not disclosed the price or carrier, but speculation has
mounted it may reach a deal with Vodafone Group Plc. Asian sales are
expected in 2008.
Friday's launch, which whipped tech lovers into the sort of frenzy
usually associated with a new video game console, was seen as a test
of wider U.S. demand for the sort of advanced phones that are already
popular in parts of Asia and Europe.
Judging by its first customers, the iPhone seemed to draw an older
generation of gadget geeks rather than young fans who may have been
put off by the price and a required service contract that will run at
least $1,400 over two years.
"The phones out there are just garbage. I've gone through several
phones, even the expensive ones. This is different," said Albert
Livingstone in Chicago. "It's the newest toy. I'm 62 -- I don't have
much time left to buy toys."
Some aimed to make a profit on the iPhone by selling it or getting
paid to wait.
At an Apple store in downtown San Francisco where about 500 people had
gathered, one young man walked out with a phone and began shouting a
price: "Fifteen-hundred, fifteen hundred!"
Many first buyers made good on their plans to try to flip the gadgets
online, but easy profits appeared out of reach for most. Of the
hundreds of phones listed on auction site eBay, the vast majority had
failed to attract a single bid or were still well below the retail
price.
In Hollywood, the event took on shades of another recent
headline-grabbing phenomenon as Apple Vice President Greg Jozwiak
emerged from a store to show off the device and was mobbed by the
eager crowd.
"I now feel like Paris Hilton," Jozwiak joked.
(Additional reporting by Franklin Paul, Robert MacMillan and Kenneth Li
in New York, Regan E. Doherty in Chicago, Eric Auchard in San Francisco)
Copyright 2007 Reuters Limited.
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