July 12, 2008 / 12:50 AM / 9 years ago

New iPhone snapped up

5 Min Read

<p>Tatiana Rodriguez takes a photo with her new iPhone 3G at an Apple Store in New York July 11, 2008.Shannon Stapleton</p>

WELLINGTON/NEW YORK (Reuters) - Apple Inc's new iPhone made its hotly awaited debut on Friday with buyers storming stores in Asia and queues forming in Europe, although network problems marred the launch in the United States.

Sales of the device, which combines a music and video player, cellphone and Web browser, kicked off in New Zealand, where a 22-year-old student became its first owner.

"I'm going to put this on charge, have a play around with it and have a nice long sleep," said Jonny Gladwell, who queued in freezing temperatures for around 60 hours to be the world's first to buy the iPhone at a minute past midnight on Friday.

In the United States, consumers were excited by the new phone's promise of faster Web speeds compared with the first iPhone and support for third-party software such as instant messaging and video games.

But many did not get a chance to try out the new gadget due to problems activating service a few hours after sales began in New York. The huge numbers of new users appeared to overwhelm Apple's systems and cause problems for the old iPhones as well.

"My old phone doesn't work and my new phone doesn't work. I'm going to have to find a pay phone. Do they still make pay phones?" said Deena Hadi, 23, a marketing analyst who waited for three hours at Apple's Fifth Avenue store in New York.

With its latest device, Apple, the creator of the Macintosh computer and iPod, hopes to ride on burgeoning demand for smartphones, an area phone makers such as South Korea's Samsung Electronics Co Ltd, Taiwan's High Tech Computer Corp and Finland's Nokia Oyj are fighting to dominate.

The new iPhone's e-mail capability squarely targets the market of Research in Motion Ltd's Blackberry.

Apple shares, which had risen by nearly 4 percent over the last week in anticipation of the launch in 21 countries, were down 2 percent on Friday afternoon in a generally weak market. Apple shares often fall after huge product launches.

"It's really what happens in the next month when the hype wears off or even in the next six months," said BMO Capital Markets analyst Keith Bachmann, adding he thought the company could face some supply shortages.

the Iphone Phenomenon

The first version of the iPhone was snapped up by 270,000 people within days of its June 2007 U.S. launch.

Analysts expect the new iPhone to draw as many as 10.5 million buyers worldwide this year and with 6 million of the older devices already sold, help Apple beat its target of selling 10 million devices by the end of 2008.

"We ordered lots. We've seen the demand the first time, but we're even blown away by this demand. I think it is unprecedented," Steve Alder, Telefonica's O2 UK iPhone director, said in London. "We've got stocks coming in every week ... I am confident that by the end of the summer, everyone will have one who wants one."

While most carriers are shouldering some of the cost of the phone for customers who sign long-running contracts -- some are opening the phone to consumers who want to pay for calls in advance and charging those customers more for the device.

"Opening it up to prepay outside North America is very important ... prepaid is the tariff of choice for most people in most parts of the world," CCS Insight analyst Shaun Collins said.

Outside one Brussels store, where the iPhone is sold unlocked and without a contract beginning at 525 euros ($828), Germain Merinero, a European Commission employee, said he was not put off by the price.

"It's a little toy and you pay what you have to," said Merinero, who was at the head of the queue.

But a midnight launch in Helsinki, the home turf of the world's biggest mobile phone maker Nokia, drew a scant crowd, while outdoor bars nearby were booming with business.

Taste of the Action

The next-generation iPhone is Asia's first official taste of the touch-screen device previously available only in the United States and Europe.

Guards in kevlar vests and helmets brandished shotguns and stood watch over 500 devices on sale in Hong Kong, a city that has seen its share of unruly crowds at major product launches.

Softbank Corp, which sells the iPhone in Japan, said over 1,500 people lined up outside its flagship Tokyo store. Policemen yelled at passers-by to make room.

But many analysts doubt the device will be popular among mainstream customers in Japan, Asia's largest retail market, because it does not support television services or electronic payment features widely used in the country.

Others point to a vibrant grey market for fakes or unlocked phones -- hacked to work on the networks of other carriers -- in China and southeast Asia, cannibalizing demand.

Outside of London's Apple store, not everyone was infected by the hype. Looking at the hubbub surrounding the store, one passerby commented: "What's the big deal?"

(Visit the Reuters MediaFile blog for more coverage on the iPhone here)

Additional reporting by Philip Blenkinsop in Brussels; Sami Torma in Helsinki; Georgina Prodhan and Matt Cowen in London; Vinicy Chan and Judy Hua in Hong Kong; Sachi Izumi in Tokyo; Edith Honan and Sinead Carew in New York; Jim Finkle in Boston; and Eric Auchard in San Francisco; Writing by Edwin Chan, Niclas Mika and Tiffany Wu; Editing by Paul Bolding and Andre Grenon

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