Is the New iPhone Good for Business?

By Reuters  |  Posted 06-09-2008

Is the New iPhone Good for Business?

June has arrived and for Apple fans and investors that means just one thing--a new iPhone.

The encore to the original iPhone, which launched nearly a year ago amid unprecedented industry buzz, is widely expected to be the main attraction when Chief Executive Steve Jobs takes the stage at Apple's developers' conference on Monday.

The new iPhone will be accompanied by support for corporate e-mail and a slate of new programs that could help boost sales of the devices, which sport a touch-sensitive screen, wireless Internet access and iPod-style media functions.

"The thing for Apple is to be able to leverage the iPhone for further innovation, or they run the risk of being the next (Motorola) RAZR, which was iconic in its own way, but for which innovation did not come fast enough," Shiv Bakhshi, director of mobility research for market research firm IDC.

Apple has declined to comment on what Jobs will announce, but analysts are betting he will show off a long-rumored phone running on a so-called 3G, or third-generation, network.

That would address one of the chief complaints about the current iPhone: the speed at which it calls up Web pages on AT&T's pokey EDGE network.

That is a particularly important concern in Europe, which is ahead of the United States in building new networks and where sales of the iPhone have lagged.

"I see 3G as important for the U.S. but essential for overseas," analyst Avi Greengart of Current Analysis said of a faster iPhone.

"It will be appreciated by technology enthusiasts and anybody who wants to get fast Web browsing outside the hot spots."

A new iPhone may be a catalyst for Apple stock. Investors have regained confidence that demand for the company's Macintosh computers and iPod media players is holding up amid fears the U.S. economy is headed for recession.

Thomas Weisel analyst Doug Reid raised his price target on Apple shares on last Monday to $225 share from $195, citing strong demand for its laptops and sales of up to 16.5 million iPhones next year.

Inexpensive iPhone?

Inexpensive iPhone?

There is also speculation Apple could bow to a cellphone industry practice and offer a subsidized iPhone, an arrangement where AT&T could kick in a couple hundred dollars to make the devices more affordable. AT&T already gives Apple a slice of the monthly service fees it gets from iPhone subscribers.

"We think that actually Apple could talk about a very disruptive business model, or a change in their business model, embracing subsidies where necessary, multiple carriers to help get the iPhone into more hands," Lehman Brothers analyst Ben Reitzes told a conference call last week.

But more important than the actual hardware will be new services and programs that can tap the increased power.

Some reckon that will include the ability to download songs from iTunes using the cellular network. IPhone users now have to be connected to a Wi-Fi network to get music from Apple's online store.

Apple will also roll out its highly anticipated support for corporate e-mail, a capability it showed off earlier this year and that is expected to give iPhone a push into business, which now overwhelmingly use Research In Motion's Blackberry devices.

Apple will also launch its iPhone "applications store" that will sell programs made by developers outside of Apple. The service marks an about-face for Jobs, who initially blocked third-party software from the device.

"That's important for developers who can now build this out as a critical platform for Apple," said Michael Gartenberg, an analyst with Jupiter Research. "The potential here is sort of unlimited."