SAN FRANCISCO - 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, 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.
But 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.
Despite that uncertainty - and despite the fact that Apple's phone won't be available until June - Wall Street has initially blessed it. Apple shares jumped $7.10 to close at $92.57 on the Nasdaq Stock Market, creating about $6 billion in new shareholder wealth. The stock has traded in a 52-week range of $50.16 to $93.16.
Nearly 120 million Apple shares changed hands Tuesday, more than 4 times the average daily volume.
Meanwhile, shares of other smart-phone makers slid: Treo-maker Palm dropped 5.7 percent, BlackBerry's Research In Motion Ltd. lost 7.9 percent and Motorola Inc. shed 1.8 percent.
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.
Phil Schiller, Apple's senior vice president for worldwide marketing, said Apple isn't getting out of the computer business, despite the name change. It's simply broadening its business.
"We sell Macintoshes and will continue to do so and are very happy with that business," he said.
The phones, which will operate exclusively on AT&T Inc.'s Cingular Wireless network, will start shipping in June. The 4-gigabyte model will cost $499, while an 8-gigabyte iPhone will be $599.
Cingular would not provide details of its financial arrangement with Apple. But Glenn Lurie, president of national distribution for Atlanta-based Cingular Wireless, said Cingular's board agreed to the collaboration without even seeing a prototype, based on Apple's reputation for innovation.
"We looked at this and said, `Apple is so good at what they do,'" he said.
It's not Cingular's first foray into music-playing phones. In 2005, the company teamed with Motorola on an iTunes-enabled phone called ROKR. But the product was widely considered a flop because it only held 100 songs and required users to buy songs through a computer and download the songs to the phone - deficiencies the new Apple phone would remedy.
IPhone is less than a half-inch thin - slimmer than almost every other phone on the market. It comes with a built-in, 2-megapixel digital camera, as well as a slot for headphones and a SIM card.
The phone automatically synchs the user's media - movies, music, photos - through iTunes on computers running either Mac OS X or Microsoft Corp.'s Windows. The device also synchs e-mail, Web bookmarks and nearly any type of digital content stored on a PC.
The phone supports Wi-Fi and Bluetooth wireless technology and can detect location from Global Positioning System satellites. It also can send and display e-mail and text messages. Apple is partnering with Yahoo Inc. on Web-based e-mail and Google Inc. on maps.
To make a call, users can tap out the number on an on-screen keypad or scroll through their contacts and dial with a single touch. To zoom in on a photo or Web site, tap twice. To zoom out, tap once with two fingers.
"It works like magic," Jobs said. "It's far more accurate than any touch display ever shipped. It ignores unintended touches. It's super smart."