iPhone will gave Apple rivals plenty to chew on

While Apple's high price will present challenges, its iPhone is expected to capture a large market. James S Granellireports

The sleek iPhone will shake up the wireless industry and force manufacturers to come up with more user-friendly handsets.

So say industry analysts this week after Apple Computer Inc showed off its highly anticipated mobile phone.

The handset, to be launched in June by Apple and Cingular Wireless, has a plethora of features that challenge the way handset makers are building so-called smart phones.

A frequent refrain among analysts this week was that the iPhone would set a high bar for customer expectations.

"Competition has just heated up," says Séamus McAteer, analyst at M:Metrics Inc, a mobile market measurement company.

At least on the surface, mobile-phone makers seem unfazed by Apple's entry into a competitive market.

"Welcome to the market and thanks for providing another proof point validating our long-held vision for converged connected devices," says William Plummer, spokesman for Finnish handset maker Nokia.

Nokia was among a number of manufacturers to introduce new and powerful mobile phones at the Consumer Electronics Show, which attracts all the main players in the sector, in Las Vegas, Nevada, this week.

The maker embraces an open system that allows customers to take advantage of all of a handset's features, even if they do not lead to more revenue for the carrier.

Mobile phone companies have long controlled what features to enable charging customers incremental amounts for each one.

But that model is breaking down as Sprint Nextel Corp and T-Mobile USA move toward the Nokia model.

Initially, the iPhone will not be on a high-speed cellular network, Sprint spokeswoman Kathleen Dunleavy notes, and Apple will control what customers are able to do.

That means the handset will not get the streaming TV programmes that Verizon Wireless, for instance, is putting on some phones. Instead, Apple customers will download a video from the iTunes online store.

While Apple faces a lot of challenges, such as its high price and the controlled system, it should capture a profitable chunk of the market, analysts say.

That, they say, makes it a big win for Cingular, the US's largest mobile phone carrier.

Though Apple's announcement was widely expected, it still had an immediate impact on Wall Street. Shares of Apple rose while those of BlackBerry maker Research in Motion Ltd and Treo maker Palm Inc sank.

As chief executive Steve Jobs spoke about other Apple products at the Macworld conference in San Francisco, analyst Rob Enderle noticed that the company's shares were falling.

However, as soon as Jobs announced the iPhone, the stock shot up, he says. It gained $7.10, to close at $92.57.

At the same time, shares of RIM and Palm fell. RIM lost nearly 8 per cent, or $11.16, to close at $131; Palm dropped 84 cents, to close at $13.92.

"Those are the two that could lose the most because they are narrowly focused on the premium handset market," McAteer says, "and the iPhone is definitely a premium device."

Among the features of the iPhone are a touch screen, e-mail service similar to BlackBerrys and Treos, easy conference calling and visual voice mail that allows customers to see which ones they want to hear.

For Apple, the move into the phone market was needed because carriers were eating into its iPod market with music-enabled phones, says Yankee analyst Linda Barrabee.

Besides, she adds: "The global phone business is going to be a much bigger business for Apple."