Thousands buy iPhones

Via Reuters

Thousands of U.S. gadget fans made an orderly pilgrimage to stores on Friday to be among the first buyers of Apple's iPhone, a music- and video-playing device expected to reshape the mobile industry.

Crowds outside some of Apple's outlets cheered as their doors opened at 6 p.m. local time, while smaller groups waited outside AT&T stores. AT&T Inc. is the phone's exclusive wireless carrier for the first two years.

"It's the best day of my life. It's Christmas, birthday, New Year's all rolled into one," said Kristian Gundersen, a 23-year-old graphic designer from Norway who flew to New York just to buy an iPhone.

Gundersen was one of the first to walk out of Apple's Fifth Avenue store with a device. Within two hours of opening, several hundred people had completed purchases at the outlet.

The iPhone melds a phone, Web browser and media player, and costs $500 to $600, depending on how much memory it has. Technology gurus praised it as a "breakthrough" device, but question whether users would be unhappy with its lack of a hardware keyboard and pokey Internet link.

The svelte gadget is a gamble by Apple Inc. co-founder and Chief Executive Steve Jobs to build upon the company's best-selling iPod music player and expand the market for its software and media services.

"They want to extend the dominance they have in terms of their ability to create really elegant hardware and software integration," said Mark McGuire, analyst with research firm Gartner. "This is the next big business unit for them."

Apple aims to sell 10 million iPhones in 2008, which would amount to a 1 percent share of the global market. It has not given a sales goal for the launch, but some analysts said it could sell up to 400,000 units in the first few days.

What is less clear is whether sales will hold up once the initial excitement has waned.

Piper Jaffray said this month Apple could sell 45 million units in 2009, putting the iPhone on par in terms of revenue with its two key businesses, the Macintosh computer and iPod.

Many analysts say Apple stock could rise another 30 percent in the coming year if the phone catches on, but some cautioned that the shares are already richly valued.

"Apple shares have already benefited from a powerful hype cycle," Cowen & Co. analyst Arnie Berman wrote in a report.

Shares of Apple rose 1.2 percent to $122.04 and have gained more than 30 percent since Jobs unveiled the phone in January. AT&T shares rose 1.9 percent to $41.50.

SHAKING UP THE INDUSTRY

Friday's launch was seen as a test of wider U.S. demand for advanced phones, which have already caught on in parts of Asia and elsewhere.

It has already whipped technology lovers into the sort of frenzy usually associated with a new video game console.

Judging by its first customers, the iPhone seemed to draw an older generation of gadget geeks rather than young fans who may have been put off by the price, including a required service contract that starts at about $1,400 for two years.

"The phones out there are just garbage. I've gone through several phones, even the expensive ones. This is different," said Albert Livingstone in Chicago. "It's the newest toy. I'm 62 -- I don't have much time left to buy toys."

Some aimed to make a profit on the iPhone by selling it or getting paid to wait.

"I'm definitely a mercenary," said Kyle Laurentine, outside a San Francisco Apple outlet, where the doors had yet to open and about 200 people were waiting. "I am 17 years old and I don't need an iPhone. I have an iPod and a cell phone."

The phones quickly popped up for sale online at inflated prices. On online classifieds site Craigslist, most listings ranged between $750 and $1,500, with one optimist asking for $10,000. One iPhone offered on auction Web site eBay had 23 bids and a price of $1,325.

Apple's online store posted a message reading: "We'll be back soon. We are busy updating the store for you and will be back by 6 p.m. PDT."

Apple is expected to sell the iPhone in Europe later this year in the run up to the holiday season. It has not disclosed the price or carrier, though speculation has mounted it may reach a deal with Britain's Vodafone Group Plc.

Sales in Asia are expected to begin sometime in 2008.

But the iPhone's effect has rippled through the wireless industry before even a single unit has been sold.

Rival Palm Inc. has said the iPhone could hurt demand for its Treo smartphone, at least in the short term.

"It's likely that as people try (the iPhone) out, there may be some stall in our sell-through," Palm Chief Executive Ed Colligan told Reuters on Thursday.