Sleek phone with smart devices

SAN FRANCISCO:Apple on Tuesday debuted its much-anticipated take on the smart phone, a sleek device with a large screen that combines a phone, an iPod and instant messaging in a new push beyond computers that sent its shares to a new record.

Steve Jobs, Apple's CEO and chief showman, pulled an iPhone from his jeans pocket at the annual Macworld conference and drew a standing ovation at the end of his speech. Apple shares surged 8 percent, while those of rival high-end phone makers Palm Inc. and Research In Motion Ltd. fell.

Lacking the diminutive keypads found on other smart phones, Apple's iPhone has a single button and a 3.5-inch (9-cm) touch screen to navigate between playing songs and videos, displaying pictures, typing instant messages, or even making phone calls.

In a nod to Apple's widening influence in consumer electronics, Jobs said it would drop "Computer" from its name. Most of what Apple Inc. sells now is mobile technology, whether it be iPods or notebooks, which now outsell desktop Macs.

The iPhone is thinner than some of the cellphone industry's sleekest devices, such as Motorola Inc.'s RAZR. It will cost $499 to $599 when it debuts in the United States, and is expected to hit Europe in the fourth quarter and Asia in 2008.

Cingular Wireless, the No. 1 U.S. wireless network and a unit of AT&T Inc., has a multiyear, exclusive agreement to provide U.S. service for the iPhone.

Jobs predicted that in 2008 Apple could sell 10 million iPhones, representing roughly 1 percent of the current annual mobile phone market of 1 billion units a year. Last year, the consumer electronics market globally was worth $145 billion.

"This is a huge market right here," Jobs said in an interview, calling the iPhone "a natural extension of what we've been doing."

Gartner analyst Mike McGuire said Apple seems to have backed up Jobs' claim on Tuesday that the company has "reinvented" the mobile phone. "It's not just candy. These are entirely useful, new ways to use your phone," McGuire said.

MACWORLD DEBUT

Jobs, speaking at the company's annual Macworld conference, predicted the iPhone would have a similar impact on Apple's fortunes as two former blockbusters: the Macintosh and iPod.

"Apple has been very fortunate that it has been able to introduce a few of these" hits, he said, referring to the introduction of the Macintosh computer in 1984 and the iPod in 2001. "We are advancing the state of the art in every aspect."

Apple shares rose $7.10 to close at a record $92.57 on Tuesday. The stock rose 18 percent in 2006, after more than doubling in 2005 and tripling in 2004, making it one of the best-performing technology stocks in recent memory.

Analysts said iPhone is a potentially huge source of growth as Apple seeks new revenue streams and ways to build on its 70-percent-plus U.S. market share for digital music players.

"I've already ordered two," said Nick Kaiser, president of Saturna Capital. "I don't know what the cost is and I don't care... The higher it is the more I like it as a shareholder."

While iPods are still selling well, growth has moderated. In the fourth quarter of its fiscal 2006, Apple sold 8.73 million iPods, up 35 percent from a year before. In the fourth quarter of fiscal 2005, Apple sold 6.5 million iPods, more than triple in the year-earlier period.

Analysts cautioned, however, that the comparatively high price would keep the iPhone from becoming a mass market hit soon, though the price would almost certainly drop, as with most consumer electronics devices over time.

"This (iPhone) does have the potential to shake up the competitive landscape even if it's not a device that's targeted to mass consumers," said Stanford Group analyst Michael Nelson. "It's clearly targeted toward the highest-value subscribers and they are the most profitable subscribers."

The iPhone is 11.6-millimeters (0.5-inches) thick, has five hours of continuous talk time and 15 hours for playing music, and includes a camera. It runs Apple's OS X operating system, has the Safari browser for Web access and e-mail functions that can handle graphics and work with external services.

The iPhone can connect to the Internet wirelessly via Wi-Fi and has Bluetooth, a short-range wireless technology that supports wireless headsets or links to devices like printers.

Separately, Jobs said AppleTV, the newly renamed device for streaming movies, music, photos, podcasts and TV shows to home entertainment systems, would ship in February. AppleTV, which comes with a 40-gigabyte internal hard drive, will cost $299.

Apple has now sold 70 million iPods and consumers have bought more than 2 billion songs for about 99 cents each on iTunes. More

than 220 TV shows are also available on iTunes.