iPhone debut causes queues and a service crash in the US

Published on Saturday 12 July 2008 14:24

APPLE'S new iPhone made its hotly awaited debut last week, with buyers storming stores across the world and network problems marring the launch in the United States.

Sales of the device, which combines a music and video player, mobile phone 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 person 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 service activation problems a few hours after sales began in New York meant many did not get the chance to try their new gadget. The huge numbers of new users seemed to overwhelm Apple's systems, causing 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, 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 Blackberry market.

Apple shares, which rose almost 4% last week in anticipation of the launch in 21 countries, were down 2% 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 that he thought the company could face some supply shortages.

The first version of the iPhone was snapped up by 270,000 people within days of its June 2007 US launch. Analysts expect the new model to draw as many as 10.5 million buyers worldwide this year and with six million of the older devices already sold, to 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 more 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 who wants one will have one."

While most carriers are shouldering some of the cost 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, starting at ?525, (420) 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," he said.

However, a midnight launch in Helsinki, the home turf of the world's biggest mobile phone maker Nokia, drew a scant crowd.