Apple's iPhone faces tougher rivals than iPod

Apple Inc. aims to build on the success of its iPod music player with the new iPhone wireless device, but it faces a crowded and competitive market in taking on established cell phone makers.

Global phone makers such as Nokia, Sony Ericsson and LG Electronics Inc. already sell music phones that the iPhone will challenge, while Research In Motion Ltd.'s Blackberry e-mail device is loved by professionals.

Rivals of AT&T Inc., the top U.S. wireless service that will exclusively sell iPhone for at least two years, will also turn up the heat by promoting their top music-phones.
"The iPhone has Harry Potter consumer interest, but it's not going to have Harry Potter sales because it's a premium device," said Strategy Analytics analyst David Kerr, referring to author J.K. Rowling's blockbuster series about a boy wizard.

The iPhone goes on sale in the United States on Friday for $500 and $600, depending on storage space and not including a required two-year service contract. The price alone will minimize the early competitive threat, as 85 percent of U.S. consumers tend to spend $100 or less on cell phones.

"If Apple was to come out with a $150 device, that's what would scare the heck out of Sony Ericsson, Motorola, Samsung (Electronics Co. Ltd.) and LG," said Kerr. He expects the iPhone to sell 2 million units in 2007 out of a forecast of 20 million total advanced phone sales and 168 million total phone sales this year.

Gadget reviewers have already lauded the iPhone's smooth touch-screen that replaces regular phone keys, as well as its relatively large screen, Web browser and media player.

Advanced phones on the market don't have enough similar features for a direct comparison, but rival carriers to AT&T, such as Sprint Nextel Corp. and Verizon Communications Inc.'s Verizon Wireless venture with Vodafone Group Plc will aggressively push their existing music phones, analysts said.

They could also reap an indirect benefit should the iPhone get consumers excited about the general market for smart phones.