A Revolution in the Making?

Here's a good piece by John Markoff on Apple's new iPhone. Steve Jobs says not to think of the new phone as a computer, but that's really what it is. The iPhone runs OS-X off the iTunes platform. I'm looking forward to seeing how the product evolves in coming years. When I compare the first iPod I purchased (Version 1.0) and the iPod I bought late last year (an 80 gig version), I'm blown away at the progress Apple has made.
I'll bet Steve was bummed after he left the company he started - particularly the way everything went down. But as we all know now, it was truly a blessing. The only important, unresolved issue facing Steve right now is the options backdating issue.
It would be tragic to see Apple lose one of the greatest innovators of all-time over a greedy and mindless activity.

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January 10, 2007
Apple Introduces Innovative Cellphone
By JOHN MARKOFF

SAN FRANCISCO, Jan. 9 — With characteristic showmanship, Steven P. Jobs introduced Apple’s long-awaited entry into the cellphone world Tuesday, pronouncing it an achievement on a par with the Macintosh and the iPod.

The creation, the iPhone, priced at $499 or $599, will not be for everyone. It will be available with a single carrier, Cingular Wireless, at midyear. Its essential functions — music player, camera, Web browser and e-mail tool as well as phone — have become commonplace in hand-held devices.

But it was the ability to fuse those elements with a raft of innovations and Apple’s distinctive design sense that had the crowd here buzzing.

Apple’s goal, Mr. Jobs said, was to translate the Macintosh computer’s ease of operation into the phone realm. “We want to make it so easy to use that everyone can use it,” he said. And he was clearly betting on translating Apple’s success with the iPod music player to a hot category of multifunction devices.

Underscoring the transformation of a quirky computer maker into the dominant force in digital music, and signaling his ambitions to extend that reach, Mr. Jobs also announced that Apple was dropping “computer” from its name and would henceforth be known as Apple Inc.

Investors took quickly to the pitch, sending Apple’s stock price up to a record close, while shares of established cellphone makers slumped.

Still, the phone is a gamble on a new business for Apple. And even with its success with the iPod and a reborn line of computers, it has not been immune to marketplace failures, like the Macintosh Cube introduced in 2000.

But in his two-hour presentation before an audience of reporters, analysts and Apple employees at the Macworld Expo trade show, the parallel he repeatedly drew was between the new phone and the Macintosh personal computer, which had a vast impact on the computer industry when it arrived in 1984.

Noting that there are occasionally new products that change everything, Mr. Jobs said, “Apple has been able to introduce a few of these into the world.”

He said Apple had set the goal of taking 1 percent of the world market for cellphones by the end of 2008. That may seem small, but with a billion handsets sold last year worldwide, that would mean 10 million iPhones — a healthy supplement to the 39 million iPods that Apple sold last year.

“Steve can make the internal combustion engine appear to be something new and cool,” said Reed E. Hundt, the former commissioner of the Federal Communications Commission. “He will provide a certain magic even to the 30-year-old cellphone.”

Mr. Jobs’s product tour de force was even more remarkable for its timing, as questions continue to be raised over the company’s stock options practices and his role in them.

“The truth of the matter is everything is fine,” he said during an interview after his presentation. “We’ve shared it all with the S.E.C.”

He acknowledged the controversy over the timing of some of Apple’s stock option grants, which Apple appears to have fanned recently with a disclosure to the Securities and Exchange Commission that contained a circumspect description of his role in the options award process.

“It’s raised questions,” he said, “but some of the journalism has been so off the mark. But I know the truth. It’s painful to read some of this stuff, but I know it’s kind of ridiculous and will pass.”

If he is in any trouble, Mr. Jobs showed no signs of it either on stage, where he was treated with great warmth by his audience of 4,000, or in an interview afterward in which he showed obvious delight in highlighting subtle industrial design features.

Mr. Jobs showed a series of applications including e-mail, advanced voice mail, photo collections and visually appealing Web searching. He promoted the fact that the new iPhone is powered by the same core OS X operating system that the Macintosh computer is based on, offering power-management features and advanced graphics abilities.

The user interface relies heavily on a high-resolution touch screen that makes it possible to use a finger to control the phone. It has features that are still more subtle, including sensors that track light and movement and proximity, to prompt the phone to control screen brightness and physical orientation and other aspects of its operation. For example, when the phone is placed next to the user’s face, the keyboard is automatically turned off.

Apple chose the name iPhone even though Cisco Systems, the network and consumer wireless company, has recently introduced a Wi-Fi-based phone with the same name. Mr. Jobs had been negotiating with Cisco executives over the trademark in recent days.

The $499 version of the device will have four gigabytes of storage, and the $599 version will offer twice that.

“At $499 and $599, it’s a pretty expensive deal,” said Rob Glaser, chief executive of Real Networks, whose online music store is a rival of Apple’s iTunes Store. “Steve is more focused on not cannibalizing iPod sales than on driving volume of phones. Those are not high-volume prices.”

Mr. Jobs defended the higher price of the new phone in a market where prices of so-called smartphones — those combining voice calling with Internet functions — are rapidly plunging to $200 and below. He contrasted the iPhone, which has only one mechanical button on its surface, with the BlackBerry and smartphones from Motorola and Palm. Rather than what he called “small plastic keyboards,” the iPhone will have a display that becomes both the keyboard and control panel, morphing to suit the current application.

“After today I don’t think anyone is going to look at these phones in the same way,” he said.

Apple’s relationship with Cingular began two years ago when Mr. Jobs phoned Stanley T. Sigman, Cingular’s chief executive, and proposed that they speak about a relationship. The two had an initial meeting in February 2005 in a New York hotel.

Apple spoke with other carriers before committing itself to its exclusive link with Cingular, Mr. Jobs said, but he would not give details.

In addition to the Apple relationship with Cingular, which Mr. Jobs said was forged without offering the wireless carrier even a peek at an early prototype, the iPhone will offer special applications from both Google and Yahoo. Users will be able to use both services’ search and e-mail services as well as a custom version of Google Maps.

Eric E. Schmidt, who is chief executive of Google as well as a member of Apple’s board, and Jerry Yang, co-founder of Yahoo, came on stage to endorse the new hand-held.

“I’m not a board member of Apple, but I would like one of these, too,” Mr. Yang said.

Regis McKenna, the veteran public relations specialist and corporate strategist who tutored Mr. Jobs in the art of high-tech marketing beginning in the late 1970s, said: “This compares favorably with the launch of the Macintosh. The price is high, but it will come down.”

Despite the widespread comment and enthusiasm that the phone generated, there were also many questions about its design and about Apple’s strategy.

Some analysts and industry executives noted that the Apple designers had shunned Cingular’s higher-speed digital cellular network. Mr. Jobs said later models would have additional networking standards.

Others questioned whether the device would be as versatile as other smartphones if it was not truly open — that is, able to accommodate many programs from third parties, as personal computers are.

Mr. Jobs would not say how open the phone would be to other developers, but added: “I don’t want people to think of this as a computer. I think of it as reinventing the phone.”

He also said he was anxious to help protect the Cingular network from the kind of viruses and worms that bedevil the PC world today.

The phones will go on sale in June through Apple and Cingular (online, by phone and in stores). Mr. Jobs said the phone was being announced ahead of its availability to head off disclosure that might have resulted in the course of Federal Communications Commission licensing.

Although it will be a half-year before it is possible to know whether Mr. Jobs has another hit product, there was no shortage of enthusiasm based on the first glimpse today.

“It’s like they read our minds,” said David Myers, executive chef at Sona restaurant in Los Angeles and chief executive of the Food Arts Group, where the employees currently use the Treo smartphone from Palm. “This is the next step in not accepting poor design any longer.”

Before he introduced the phone, Mr. Jobs said Apple TV, the digital video system that he announced as iTV last year, would be available for $299 in February. The device will store up to 50 hours of video and permit wireless streaming of content from a computer to a television.

Laurie J. Flynn and Miguel Helft contributed reporting from San Francisco and Brad Stone from Las Vegas.