First there was iPod, now there's iPhone.
The next phase of Apple's plan to reinvent itself as a consumer electronics company was unveiled Tuesday by Apple CEO Steve Jobs, and it received a warm reception from Wall Street. The touch-screen-controlled device plays music, stores photos, surfs the Internet and delivers voice mail and e-mail differently than any other cell phone.
IPhone, introduced by Jobs during his keynote speech at the annual Macworld Conference and Expo in San Francisco, was accompanied by Apple TV, a set-top box that streams video from computers to television. the company is even getting a name change - from Apple Computer Inc. to just Apple Inc. - to better reflect its transition to a full-scale consumer electronics manufacturer and retailer.
After rising 6 percent on Tuesday, Apple shares gained $4.43, or 4.79 percent, to close at $97 Wednesday on the Nasdaq Stock Market. The stock briefly reached an all-time high of $97.80 during trading.
Lehman Brothers analyst Harry E. Blount said in a research report that by announcing in January a product Apple plans to launch in June, the company risks encouraging consumers considering buying an iPod to wait for the iPhone's release.
Overall, though, analysts said the smartphones represent a significant opportunity for Apple.
"Initial customer interest appears rabid," Deutsche Bank analyst Chris Whitmore wrote in a client note. "The long-awaited iPhone was the highlight of the show and stunned a technically sophisticated audience."
It remains to be seen whether a $500 phone and some other gadgets will be enough for the company to remain a Wall Street darling and sustain the market dominance enjoyed by iPod, Apple's iconic digital music player. Others wonder whether the phone - despite its slim elegance and wide-screen monitor - is priced competitively.
"Prospects for the new device are positive, but it is not a given that Apple can win against a slew of wireless providers, phone manufacturers, and Microsoft, all of whom are similarly motivated to raise their flag on the same territory," said James L. McQuivey, a communications technology professor at Boston University.
Even the phone's name is in contention.
Linksys, a division of Cisco Systems Inc. that makes networking equipment for the home and small businesses, unveiled its new iPhone line of Internet-enabled phones last month. Cisco has owned the trademark on the name "iPhone" since 2000. Although Cisco is agitating for Apple to make a public statement clarifying use of the name, Apple executives say their cellular phone doesn't compete with Cisco's Internet phone.
Tim Bajarin, principal analyst with Creative Strategies, said the iPhone appears poised to revolutionize the way cell phones are designed and sold.
"This goes beyond smart phones and should be given its own category called `brilliant' phones," he said. "Cell phones are on track to become the largest platform for digital music playback, and Apple needed to make this move to help defend their iPod franchise as well as extend it beyond a dedicated music environment."
Apple's iPod currently commands about 75 percent of the market for downloaded music and portable music players. The company's iTunes digital media store has sold more than 2 billion songs, 50 million television episodes and more than 1.3 million feature-length films, catapulting iTunes beyond Amazon.com for digital media sales.
Initial hopes for the iPhone are relatively modest. The company hopes to sell about 10 million units in 2008, or about 1 percent of the market. About 957 million cellular phones were sold in 2006.
Apple TV, which a price tag of $300, has a 40-gigabyte hard drive and stores up to 50 hours of videos, 9,000 songs or 25,000 photos. It will be available in February.