iLounge

Up to 75 percent of iPhone purchasers will be first-time AT&T wireless subscribers, AT&T Chief Financial Officer Rick Lindner said this week. “The majority of those customers, two-thirds to three-fourths, will be coming from outside of our current wireless customer base and that’s a good thing,” Lindner said during a speech at a Merrill Lynch conference. The iPhone is likely to draw more customers to AT&T stores “at the launch and throughout the rest of the year,” Lindner said. “Creating more traffic in the stores means more sales.” AT&T (formerly Cingular) will be the exclusive U.S. carrier of Apple’s iPhone when it launches in June.

Apple Chief Operating Officer Tim Cook reiterated yesterday that the company remains on track to release its iPhone in June. Speaking at the Goldman Sachs 2007 Technology Investment Symposium Conference, Cook said Apple expects to sell 10 million of the devices in 2008, but said it is too early to tell if the iPhone will take sales away from the iPod. “The iPod is being sold for a wide variety of uses. We’ll see what happens,” Cook said.

Goldman Sachs said it believes Apple will sell more than 14 million iPhones through 2008 based on results from a recent buying intention survey. The investment firm forecasts sales of 4 million iPhones in 2007 and 10.5 million in 2008. The consumer survey—conducted in the U.S., U.K., China, and India prior to the iPhone’s official unveiling—found that the number of potential iPhone buyers is equivalent to 75% of the installed base of current iPod owners. In the U.S., where Apple ranked as the No. 4 most desired handset brand, 71% of respondents indicated interest in a potential Apple phone. The survey also found that a number of consumers are willing to switch carriers to get the iPhone, with 30% of U.K. respondents and 15% in the U.S. suggesting that they would switch.

During tonight’s broadcast of the 79th annual Academy Awards, the first television commercial for Apple’s iPhone was aired—multiple times. The 30-second teaser featured over 30 famous actors and actresses—such as Lucille Ball, Michael J. Fox, Will Ferrell, Robert Redford and Harrison Ford—answering the phone in a series of famous television, cartoon, and movie sequences. A rotating image of the iPhone appeared, followed by the word “Hello” on the screen in white text on a black background, followed by the line “Coming in June.” The iPhone screen now features the AT&T name rather than Cingular’s, as Cingular has recently been absorbed into the larger phone company. View the commercial, set to the song Inside Your Head by Eberg, below.

Only 1 percent of consumers are willing to pay $500 for Apple’s iPhone, according to results of a survey released this week. Nearly half of consumers surveyed, however, would buy the device if it was priced from $200 to $299. “Online market research firm Compete Inc. surveyed 379 people in the U.S., most of whom had heard of the iPhone and have shopped for an iPod, to find out how interested they are in the device to produce the uncommissioned report,” reports InfoWorld. “Among the 26 percent of respondents who said they’re likely to buy an iPhone, only 1 percent said they’d pay $500 for it. When Apple introduced the iPhone in January, it said it would cost $500 on the low end. 42 percent of those who said they’re likely to buy the phone said they’d pay $200 to $299.”

Apple and Cisco said late Wednesday that they have settled their dispute involving the iPhone trademark. Under the terms of the agreement, both companies are free to use the “iPhone” trademark on their products, and each side will dismiss any pending actions regarding the trademark. In addition, Apple and Cisco will “explore opportunities for interoperability in the areas of security, and consumer and enterprise communications,” according to an announcement from the companies. 

In a front page article entitled ”How Steve Jobs Played Hardball In iPhone Birth,” the Wall Street Journal offers a glimpse of how the iPhone came to be. The in-depth article has many details that were not previously revealed, including the fact that only three Cingular executives got to see the iPhone before it was announced. A snippet from the article (paid subscription required) is below.

Early on, both sides determined it would be a bad idea for Apple to offer its own cellphone service, leasing access to Cingular’s network. Even though Virgin Mobile USA and other startup cellphone operators were using that method with some success, Mr. Jobs was cautious. He viewed the cellphone business as an unforgiving one, where carriers are blamed for network problems and overwhelmed by customer complaints.

Instead, he wanted to focus on building a good handset. Cingular, realizing that Motorola’s device “didn’t feel like an Apple phone,” according to one executive involved in handset decisions, was willing to give Mr. Jobs room to come up with something.

Apple assembled a development team to build the iPhone that quickly mushroomed into hundreds of people. Mr. Jobs worked closely with Jonathan Ive, the design guru at Apple who was responsible for the look of the iPod and other products, to come up with a head-turning design for the iPhone.

Cisco has again given Apple more time to respond to its trademark lawsuit over the iPhone name, extending negotiations until February 21st. The Associated Press reports: “After the companies had previously agreed to extend the deadline until Thursday night, Cisco, the world’s largest networking equipment maker, said Apple now has until Wednesday to respond to the lawsuit filed last month in San Francisco federal court. Both companies reiterated previous statements that they want to use the extra time to reach a settlement.”

Chinese electronics maker Meizu is the first company to closely copy the look and feel of Apple’s iPhone. The Meizu miniOne, due out in the fourth quarter of 2007, is a GSM phone with numerous iPhone similarities, including a curved, black and polished steel design, touch-screen interface, and a nearly identical on-screen software icon layout. According to preliminary specifications, the miniOne is slightly smaller and thinner than the iPhone, has a higher resolution screen, and runs the Windows CE 6.0 operating system. Meizu also claims that the phone will be powered by the ARM11 processor and will sport two built-in cameras—a 3.0 megapixel camera on the back and an 0.3 megapixel camera on the phone’s face.

Electronic Arts looks to be talking with Apple about developing casual games for the upcoming iPhone, according to BusinessWeek. EA currently produces such titles for the iPod. Mitch Lasky of EA Mobile told said his company is in talks with Apple regarding iPhone plans and that “we see a lot of the technology that we’ve utilized on the iPod side being incorporated into the iPhone.” Apple at this point has not indicated if games would be developed for the new device. 

In a joint statement from Apple and Cisco, the companies said today that negotiations over the iPhone trademark had resumed, and that legal proceedings will be delayed until Apple can respond to Cisco’s lawsuit. “Apple and Cisco have agreed to extend the time for Apple to respond to the lawsuit to allow for discussions between the companies with the aim of reaching agreement on trademark rights and interoperability,” the brief statement reads. As previously reported, Cisco, which claims to own the iPhone trademark, sued Apple last month for calling its new mobile phone the iPhone. Apple and Cisco had reportedly been in licensing talks, but Apple had ended them without reaching an agreement. Apple recently called Cisco’s lawsuit “silly.”

Verizon Wireless rejected Apple’s offer to be the exclusive distributor of the iPhone almost two years ago due to Apple’s demands. According to Jim Gerace, a Verizon Wireless vice president, Apple wanted a percentage of the monthly service fees, say over where the iPhone could be sold, and control of iPhone customers. “We said no. We have nothing bad to say about the Apple iPhone,” Gerace said. “We just couldn’t reach a deal that was mutually beneficial.”

The Verizon executive said only Apple Stores and Verizon stores would have sold the iPhone, much like the current deal with AT&T/Cingular. But Gerace said that would have put Verizon’s distribution partners, such as Wal-Mart and Best Buy, at a disadvantage. Gerace also said that Apple wanted sole discretion over whether to replace or repair a malfunctioning iPhone. “They would have been stepping in between us and our customers to the point where we would have almost had to take a back seat… on hardware and service support,” Gerace said.

Apple has been met with another fight for the iPhone brand name by a small company in Canada. “Comwave Telecom Inc. has used the iPhone brand since 2004 to sell Internet phone service to its customers, and filed documents opposing Apple’s motion to take the name,” reports Bloomberg News. “The dispute expands Apple’s legal woes over the brand, which Cisco Systems claims to have trademarked in the U.S. The spat also may lead to delays in getting the phone to Canadian consumers.” Comwave president Yuval Barzakay said, “It’s a crucial brand for us… Our legal folks believe we’re certainly in the driver’s seat.” As previously reported, Apple is currently battling Cisco Systems over the iPhone trademark in the U.S.

The expected popularity of the iPhone could create challenges for some of the device’s parts suppliers. According to analysts, Asian handset-component makers may see shortages of key components if the iPhone takes off quickly. “While niche firms from chip maker Toshiba in Japan to Germany’s Balda, a touch-panel supplier, stand to gain from the phone’s debut, analysts say parts makers need to be prepared to quickly ramp up output or risk shortages if the product is a quick success,” reports Reuters. “Companies at the greatest risk are makers of the NAND-style flash memory that will power the phones, as well as makers of product-specific components like the special touch panels that will set the iPhone apart from other more traditional cell phones.” Apple the iPhone in the U.S. in June, with a target of 10 million units in 2008.

Rogers Wireless has confirmed that it will be the exclusive carrier for Apple’s iPhone in Canada. “Rogers is actively working with Apple to launch the iPhone in Canada as soon as possible and will be the exclusive provider of the iPhone in Canada,” the company said this week in a customer service email. Rogers Wireless is the largest Canadian wireless communications service provider. An exact date and service pricing were not mentioned. Apple is set to release the iPhone in the U.S. in June.

AT&T/Cingular plan to aggressively push Apple’s iPhone to new customers, offering them 18 months of free service, according to Jim Cramer, director and co-founder of investment site TheStreet.com. “The company made it very clear that it’s going to use Apple’s iPhone to get customers from Verizon Wireless by giving away its service for a year and a half to those customers who buy the phone,” Cramer said after speaking with executives from AT&T/Cingular.

“Management sounded like kids when talking about the iPhone and how it was going to remake AT&T and that it was the greatest invention they’ve ever seen,” Cramer said in a related article. “Now, AT&T’s all about market share, and if you read between the lines, I think you see a strategy coming where the device’s $500 price point is preserved but the service contract is greatly reduced. I think that AT&T—and not Apple—is the key to this next leg, and CEO Stan Sigman can make it happen.”

Update: According to a Cingular representative, the company will not be offering a free period of service with the iPhone. “The report is nonsense,” the spokesperson said. “We’ve always said the only way you can get the iPhone is with a Cingular rate plan.”

According to internet metrics firm Hitwise, online searches for the iPhone have passed searches for the iPod since the all-in-one device was announced at Macworld Expo earlier this month. “For the week ending 1/13/07, the share of searches for ‘iphone’ was greater than the weekly share of searches for ‘ipod’ at any time during 2006,” reports Hitwise. “The week ending 1/20/07 still showed a greater volume of searches for ‘iphone’ versus ‘ipod.’ This early surge in interest should indicate a rosy future for the iPhone when it becomes available in later in the year. Interestingly, the volume of searches for ‘ipod’ peaked during the last week of the year, rather than before Christmas as one would expect.”

Apple and Cingular will see a nearly 50 percent gross margin on each iPhone sold, giving the companies “a hefty profit, as well as plenty of room for future price cuts,” according to a preliminary Bill of Materials (BoM) estimate by iSuppli.

“iSuppli estimates the 4GB version of the Apple iPhone will carry a $229.85 hardware BoM and manufacturing cost and a $245.83 total expense, yielding a 49.3 percent margin on each unit sold at the $499 retail price,” said Andrew Rassweiler, teardown services manager and senior analyst for iSuppli. “Meanwhile, the 8GB Apple iPhone will sport a $264.85 hardware cost and a $280.83 total expense, amounting to a 46.9 percent margin at the $599 retail price.”

LG Electronics is considering whether it will file a lawsuit against Apple, claiming that the iPhone design is a clone of the unreleased LG KE850 “Prada” mobile phone. The LG phone shares some similarities with the iPhone, including a rounded, black design, touch-sensitive controls and a full-screen interface. “At first glance, we recognized the iPhone shares many form factors with the Prada phone. We are flattered that other makers follow our design policy,” LG spokesman Lee Hyoung-kun said. “We can’t say at the moment whether or not we will file a lawsuit against Apple regarding this. It’s too early to make remarks on the issues.”

Delivered by Apple CEO Steve Jobs, this year’s keynote address from Macworld Expo is now available as a free downloadable podcast from the iTunes Store. Despite the fact that it clocks in at a feature film-length 1 hour and 45 minutes, Jobs’ keynote is unquestionably the most engaging public speech iLounge’s editors have ever seen, introducing the company’s new iPhone with a level of oratorical mastery that deserves academic study. The download is 1.21GB, and well worth the transfer time.