Apples much-anticipated iPhone 3G arrived Friday with tech enthusiasts lining up at stores -- and many enduring problems trying to activate the devices.
Early demand was high for Apples (NasdaqGS:AAPL - News) new and improved touch-screen smart phone. But the debut was marred by a problem with Apples iTunes servers that prevented the phones from being fully activated. On Friday, Apple was working to correct the problem, which also affected users of the original iPhone who tried to download a software upgrade.
Once the intense media coverage of the iPhone 3G launch dies down, the real work for Apple begins. It has to break through to the mass market to reach its goal of selling 10 million iPhones this year.
Despite all the hype surrounding the iPhone, which debuted on June 29, 2007, sales of the product have underperformed. As of March 29, Apple had sold just 1.7 million iPhones in the year, and 5.4 million since launch. To spark sales, Apple has twice cut the price of the device.
When it debuted last year in the U.S., the iPhone cost $499 for a 4-gigabyte model and $599 for an 8 GB model with a two-year service contract with AT&T (NYSE:T - News). On Sept. 5, Apple slashed the price of the 8 GB iPhone to $399 and discontinued the 4 GB model.
The new iPhone 3G costs $199 for the 8 GB model and $299 for a 16 GB model, thanks to carrier subsidies. The iPhone 3G still requires a two-year contract with AT&T in the U.S. The cheapest service plan costs $70 a month before taxes and excluding text message fees. Thats $10 more than the original iPhone.
Most analysts say Apple will be able to meet its iPhone targets.
Shaw Wu, an analyst with American Technology Research, says he expects Apple to ship 11 million iPhones this year, for a total of 14.6 million shipped. He sees Apple shipping 17 million iPhones in 2009.
Today, the iPhone contributes only 3% to 4% of Apples revenue, but Wu says that could jump the next two to five years. If Apple can continue the momentum, the iPhone business could be as large as the current Macintosh computer business, or about $15 billion to $20billion in annual revenue, Wu wrote in a research note Friday.
Shiv Bakhshi, an analyst with market tracker IDC, also says Apple will meet its iPhone sales targets.
Longer term, though, Apple will need to continue to innovate to stay ahead of rivals, he says.
Users have a long wish list for the iPhone, Bakhshi says. Critics wanted the new iPhone to have multimedia messaging, a video camcorder and more. "Some people expected it to make them smoothies, Im sure," Bakhshi said.
For the iPhone 3G, Apple focused on fixing the big concerns with the initial iPhone, says Michael Gartenberg, an analyst with Jupiter Research. It added support for 3G wireless networks for faster Web and e-mail downloads. It also allowed people to add third-party software applications through Apples new online App Store. Plus, it added business-class mobile e-mail, secure access to corporate networks and GPS navigation.
"Most of the real issues in the first generation of the product have been addressed and addressed well," Gartenberg said.
Yet, there are ways to improve the product, he says. Some of the other complaints about the iPhone have been the lack of a removable battery and no Bluetooth wireless support.
Early demand was high for Apples (NasdaqGS:AAPL - News) new and improved touch-screen smart phone. But the debut was marred by a problem with Apples iTunes servers that prevented the phones from being fully activated. On Friday, Apple was working to correct the problem, which also affected users of the original iPhone who tried to download a software upgrade.
Once the intense media coverage of the iPhone 3G launch dies down, the real work for Apple begins. It has to break through to the mass market to reach its goal of selling 10 million iPhones this year.
Despite all the hype surrounding the iPhone, which debuted on June 29, 2007, sales of the product have underperformed. As of March 29, Apple had sold just 1.7 million iPhones in the year, and 5.4 million since launch. To spark sales, Apple has twice cut the price of the device.
When it debuted last year in the U.S., the iPhone cost $499 for a 4-gigabyte model and $599 for an 8 GB model with a two-year service contract with AT&T (NYSE:T - News). On Sept. 5, Apple slashed the price of the 8 GB iPhone to $399 and discontinued the 4 GB model.
The new iPhone 3G costs $199 for the 8 GB model and $299 for a 16 GB model, thanks to carrier subsidies. The iPhone 3G still requires a two-year contract with AT&T in the U.S. The cheapest service plan costs $70 a month before taxes and excluding text message fees. Thats $10 more than the original iPhone.
Most analysts say Apple will be able to meet its iPhone targets.
Shaw Wu, an analyst with American Technology Research, says he expects Apple to ship 11 million iPhones this year, for a total of 14.6 million shipped. He sees Apple shipping 17 million iPhones in 2009.
Today, the iPhone contributes only 3% to 4% of Apples revenue, but Wu says that could jump the next two to five years. If Apple can continue the momentum, the iPhone business could be as large as the current Macintosh computer business, or about $15 billion to $20billion in annual revenue, Wu wrote in a research note Friday.
Shiv Bakhshi, an analyst with market tracker IDC, also says Apple will meet its iPhone sales targets.
Longer term, though, Apple will need to continue to innovate to stay ahead of rivals, he says.
Users have a long wish list for the iPhone, Bakhshi says. Critics wanted the new iPhone to have multimedia messaging, a video camcorder and more. "Some people expected it to make them smoothies, Im sure," Bakhshi said.
For the iPhone 3G, Apple focused on fixing the big concerns with the initial iPhone, says Michael Gartenberg, an analyst with Jupiter Research. It added support for 3G wireless networks for faster Web and e-mail downloads. It also allowed people to add third-party software applications through Apples new online App Store. Plus, it added business-class mobile e-mail, secure access to corporate networks and GPS navigation.
"Most of the real issues in the first generation of the product have been addressed and addressed well," Gartenberg said.
Yet, there are ways to improve the product, he says. Some of the other complaints about the iPhone have been the lack of a removable battery and no Bluetooth wireless support.
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