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Will iPhone change everything - or fall flat?

Harvard business professor Clayton Christensen coined the phrase "disruptive innovation" to describe a new product so advanced and appealing that it displaces the technology that preceded it.

Think of the steam engine, which replaced water and horse power, and launched the industrial revolution. Or, more recently, digital cameras, DVDs and iPods, which have made a generation of clunkier devices virtually obsolete.

Could Apple Inc.'s iPhone, with its vaunted multitouch screen, be the innovation that pushes aside cellphones, BlackBerrys and even PCs when it goes on sale later this week?

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That seems unlikely. But the mere fact that analysts and tech geeks alike are buzzing about the device's promise in the same breath as other breakthrough technologies is a testament to Apple's design and marketing touch.

"It's one of the most innovative devices to come along in a long time," agreed Tim Bajarin, a veteran Apple analyst and president of technology consultant Creative Strategies of Campbell, Calif.

Mr. Bajarin has tried out the iPhone, and he agrees with the hype that it's like having the Internet in your pocket.

"People will be surprised how good of an experience it is. Multitouch is the future of where these interfaces will go."

Unlike a mobile phone, the iPhone promises to be an iPod-plus, with colour graphics and an Internet connection. And unlike the BlackBerry, its oversized screen makes it a Web surfing computer, as well as a phone and e-mail device.

In its search for superlatives, Apple isn't shy about calling its latest product revolutionary.

"There has never been a phone like iPhone, and we can't wait to get this truly magical product into the hands of customers," Apple chairman Steve Jobs said last week.

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And the feeling is apparently mutual. More than six in 10 Americans are aware the iPhone is coming - thanks to a major TV ad blitz - and as many as 19 million say they want one, according to a survey by cellphone research company M:Metrics.

"This data confirms that the iPhone has sparked the imaginations of consumers and is not merely a topic of conversation among insiders and technology enthusiasts," said Mark Donovan, senior vice-president and analyst at M:Metrics.

Sales forecasts for the iPhone are all over the map and Apple is being a bit cagey about its prospects, predicting only that it plans to sell 10 million units by the end of next year.

Analyst Ben Reitzes of UBS Securities in New York expects Apple to ship about 950,000 iPhones this year and more than eight million next year in what he says is a "conservative" forecast.

If the iPhone is even a fraction as successful as the iPod, it will still be a hit. In five years, Apple has sold 100 million iPods.

Mr. Reitzes said the obvious key to the iPhone is its touch-screen technology, which could soon find its way into a new generation of Apple devices, including video iPods, Mac computers and even TVs. The "multiplier effect" could propel Apple sales for several years.

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"The multitouch platform ... can be integrated into several products, including Macs and iPods, facilitated by Apple's software and retail ecosystem," he said. "This mega-platform could help Apple become an open-ended growth story again."

If Mr. Reitzes and other analysts are right, the iPhone will mark the third time that Mr. Jobs has hit pay dirt with a breakthrough product. He did it first in 1984, with the easy-to-use Macintosh computer, and then again in 2001 with the iPod.

In between, the computer company almost crashed. And Mr. Jobs was exiled from his own company.

But Mr. Jobs came back in 1997. He reinvented Apple, and himself, as a purveyor of must-have computers and tech gadgets, with enticing designs that made technology fashionable and easy to use.

Part function, part art and always cool, Apple's designs stand out for their raw simplicity. The iPod is, of course, the classic example. In an era when makers of other electronic devices wanted their products' complexity to stand out, Mr. Jobs and his lead designer, Briton Jonathan Ive, created a tiny device in 2002 that could store and play a lifetime of music. It looked more like a white soap dish than a sophisticated piece of electronics.

The iPod cemented Apple's comeback. Apple racked up $21.6-billion ( U.S.) in sales last year, and $2.8-billion in profit.

But its future is now with the iPhone. Apple's stock price has jumped nearly 50 per cent since plans for the iPhone were announced in January.

The iPhone allure is the same enticing simplicity. Its touch-screen, which replaces manual buttons, allows users to effortlessly leaf through functions and pages, without having to type.

But Apple has numerous obstacles to overcome. The company opted to go with a single cellular company - AT&T - in the United States. That will force enthusiasts to switch providers if they want the iPhone.

AT&T says roughly 40 per cent of people who have shown interest in the iPhone are customers of competing providers. And Apple and AT&T are demanding that customers sign a two-year service contract at about $40 a month. But if the gamble pays off, AT&T could wind up stealing as many as three million customers away from rivals. Nor is it cheap. The iPhone comes in two models - a four-gigabyte model for $499 and an eight-gigabyte model for $599. That's as much as twice the cost of competing smart phones.

It won't even be available in Canada, Europe and Asia until later this year at the earliest, as Apple gauges the initial market response in the United States. Rogers is expected to be the Canadian iPhone carrier.

Critics have also pointed to several key technical drawbacks. Because the device will run on AT&T's Edge network, which is already a generation behind other data networks, Web surfing could be disappointingly slow. Nor will users be able to download music and videos directly from the Web. They'll still have to have a host computer, running the iTunes software.

If Apple can't cope with the technical issues and an already crowded market, the iPhone could wind up as another Segway - a clearly "disruptive" technology that failed to find enough takers at the steep price.

A brief history of Apple innovation

1976: Apple I

The $500 (U.S.) computer didn't have a keyboard or a monitor and Apple co-founder Steve Wozniak built them himself -- all 200 of them.

1977: Apple II

The company's first full personal computer, boasting colour graphics and a 5 ¼ -inch floppy disk drive.

1983: Lisa

It stood for Local Integrated Software Architecture, and also happened to be the name of founder Steve Jobs' daughter. The PC cost $50-million to develop and helped pioneer point-and-click mouse technology, but its $9,995 price tag caused the product to flop.

1984: Macintosh

It was launched with a powerful $1.5-million Super Bowl ad that likened the IBM PC to George Orwell's Big Brother, launching a PC-Apple rivalry that persists today.

1989: MacintoshPortable

In spite of its name, it was pretty clunky and not very portable.

1991: PowerBook 100

Established Apple as a maker of quality, powerful portables.

1994: Newton

One of the first PDAs. It was a financial flop, but it paved the way for the Palm Pilot.

1995: Pippin

Apple's first foray into gaming products.

1998: iMac

Designed by Jonathan Ive, the colourful iMac was the first of the company's "i" line of trendy products that gave Apple a second life versus the dominant Windows-powered PCs. Apple sold 800,000 units in five months and turned a profit for the first time in five years.

2001: iPod

The company opened its first stores, launched iTunes and 100-million units later, the iPod is a mega-hit.

2004: iPod Mini

The iPod goes mass market with a cheaper, more powerful version of its now-ubiquitous MP3 player.

2006: MacBook Pro

Apple's first notebook computer powered by Intel chips

2007: iPhone

Apple's entry into the smart phone market.


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About the Author
National Business Correspondent

Barrie McKenna is correspondent and columnist in The Globe and Mail's Ottawa bureau. From 1997 until 2010, he covered Washington from The Globe's bureau in the U.S. capital. During his U.S. posting, he traveled widely, filing stories from more than 30 states. Mr. McKenna has also been a frequent visitor to Japan and South Korea on reporting assignments. More


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