Update: Jobs unveils $199 'iPhone 3G'

Apple sets on-sale as July 11, touts GPS, faster Net speeds, third-party apps

By Gregg Keizer

June 9, 2008 12:00 PM ET

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iPhone 3G

Computerworld - Apple Inc. CEO Steve Jobs kicked off his company's developers conference today by unveiling a new iPhone that connects to faster 3G-based networks, includes built-in GPS and costs half as much as the current lowest-priced model.

The new iPhones -- $199 for one with 8GB of storage space, $299 for 16GB of storage -- will be available starting Friday, July 11 in 22 countries, including Canada, Germany, Japan, the U.K. and the U.S. By the end of the year, said Jobs at the Worldwide Developers Conference (WWDC) in San Francisco, Apple expects to be selling the iPhone in 70 countries.

In the U.S., the new iPhone will be sold at Apple-owned retail stores as well as the stores operated by its network partner, AT&T. As of Monday, the Apple online store was not taking pre-orders.

"We've learned so much with the first iPhone," said Jobs near the end of the 105-min. keynote. "We've taken everything we've learned and more and created the iPhone 3G."

He called out a number of things that Apple needed to add to the iPhone to take it to the next sales level, including 3G, enterprise support, wider availability, third-party applications and a lower price. "Everyone wants an iPhone, but we need to make it more affordable," he said.

At the new price points, the future iPhone will cost less than a comparably-equipped iPod touch, which currently sells for $299 for an 8GB device, a fact not lost on Ezra Gottheil, an analyst with Technology Business Research. "There's nothing to be lost buying an iPhone then, is there?" Gottheil said, who added that he expects Apple to revamp or re-price the iPod touch line soon.

Apple Inc. CEO Steve Jobs unveiled the new iPhone 3G to developers at the Worldwide Developers Conference in San Francisco today. (Photo by Matt Hamblen/Computerworld)

"I'm surprised at the prices," said Gottheil. At first glance, he said, it looks like Apple is prepared to buy market share and damn the profit margins. "Apple did what it had to do to make its numbers," Gottheil added, referring to the company's often-repeated sales goal of 10 million iPhones during 2008.

Charles Golvin, a principal analyst with Forrester Research, agreed. "Apple needed 3G, they needed a more attractive price, to make its goal," he said, adding that the prospects of reaching the 10-million mark this year are "pretty much a certainty."

The new iPhone is faster and more feature-packed, said Jobs, who trumpeted the fast download speeds of 3G and cited the new GPS (global positioning system) functionality. "Location services is going to be a really big deal on the iPhone," said Jobs. "It's going to explode."

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Although it sports the same 3.5-in. display as the first-generation model, the newer iPhone's battery has been boosted so that it now offers 10 hours of talk time when used with the older EDGE-based network, double the original. 3G talk time comes in at five hours, while the battery can sustain five to six hours of high-speed browsing, seven hours of video or 24 hours of audio before needing a recharge, according to Apple.

Neither Golvin or Gottheil expressed surprise by the details divulged today, no shock since the new iPhone was, perhaps, the year's worst-kept secret. "There are no surprises here," said Golvin. "Apple addressed all the shortcomings of the original."

July's iPhone will come in two shades for the first time: white and black, although the less-expensive 8GB model is limited to the latter.

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