Telecom April 3, 2008, 5:00PM EST So Maybe Apple Was onto Something Rivals trying to come up with an iPhone slayer will need more than fancy features to outdo the leader
by Cliff Edwards and Bruce Einhorn
Since the iPhone hit the market in mid-2007, competing phonemakers and wireless-service providers that don't have a deal to sell the Apple (AAPL) device have tried their best to betray no envy. They rolled out a few devices mimicking the iPhone's touch screen, but they mostly hoped the phone, offered exclusively by AT&T (T), wouldn't become a hit. Too bad. By the fourth quarter of last year, Apple had grabbed more than a quarter of the U.S. market for what are known as smartphones, the mobile phones that handle computer-like tasks such as e-mail and Web browsing.
A new crop of would-be iPhone slayers is about to hit the market. To help them compete with AT&T, Verizon Wireless and Sprint Nextel (S) are working with some of the biggest names in the industry, including Nokia (NOK) and Samsung Electronics, to develop new handhelds. On Apr. 1, Sprint unveiled an iPhone lookalike from Samsung called Instinct that will debut later this year. "[Apple] is not going to own the space themselves," says Danny Bowman, Sprint's vice-president. "They're going to have a lot of competition."
Smartphone users are coveted by carriers. They tend to spend liberally on wireless services each month as they surf the Web and check their e-mail. Until last year the market's unrivaled leader was Research In Motion, (RIMM) whose BlackBerry phones are sold by all the major wireless carriers in the U.S. RIM is still the largest smartphone maker, with 41% U.S. market share in the fourth quarter, according to research firm Canalys. But Apple has become a contender in less than a year-and has given AT&T a competitive advantage, since people who want the device have only one place to go.
The fight to take on Apple may prove a boon for consumers. The new phones will offer more than e-mail and the primitive Web-browsing capabilities of today's clumsy devices, more closely replicating the ease, speed, and flexibility of personal computers. A greater variety of smartphones will be available, many at prices lower than the $399 to $499 price tag for an iPhone. LG Electronics' KF-700, due in the U.S. later this year, has a keyboard that slides out from behind its touch screen, for easier typing. Sony Ericsson's Xperia X1 will also offer a touch screen and slide-out keyboard.
Whizzy technology won't be enough to beat Apple, though. What's made the iPhone a hit is its smooth integration of hardware and software and its easy operation. The device weaves together a wide array of computer-like functions in a way that even technophobes can master in minutes. Rivals haven't been able to imitate the trick so far. Sprint's first effort to field an iPhone competitor, a gadget from Taiwan's High Tech Computer, has had disappointing sales since its November debut.
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