Glitches mar Apple's iPhone debut
NEW YORK (Fortune) -- The new Apple iPhone went on sale Friday morning, but early reports of problems activating the device threatened to overshadow its debut.
As eager buyers flocked to Apple stores, news sites chronicled reports that Apple's iTunes store was struggling with a massive outage to its activation system.
Apple's new iPhone is cheaper and built on third-generation, or 3G, technology that is faster than the original iPhone's network.
As Fortune.com first reported, AT&T, the iPhone's exclusive carrier in the United States, has cut the price of the iPhone in half: an 8-GB model sells for $199, or $200 less than the original iPhone. The 16-GB version costs $299.
The Apple Store on New York City's tony Fifth Avenue, which drew a crowd of 150 people just after 5:00 a.m. ET, was moving customers through the line in about 10 minutes per customer when the doors opened at 8:00 a.m., according to Fortune's Philip Elmer-DeWitt.
Apple employees clapped and cheered as shoppers poured in - just like they did when the iPhone launched in June 2007
High expectations
But problems soon appeared. Elmer-DeWitt, who live-blogged from the store, was one of the first to report difficulty setting up his new phone. He was told, along with other customers, to go home and try to activate their devices later.
Elmer-DeWitt was able to activate his phone about three hours into the process. By early afternoon, there were more anecdotal online reports of users completing the activation process.
The system crash affected as many as 70 countries where the new iPhone debuted Friday, and hobbled owners of the original iPhone and the iPod touch looking to upgrade their software.
In other Apple news, users attempting to sign up for MobileMe, a $99-a-year service that synchs e-mail and other data across Mac devices, also encountered technical problems, according to the Associated Press. Apple began selling the service Friday.
The iPhone 3G rollout was in stark contrast to last year's debut, when hordes of eager buyers camped out for days at Apple stores around the country and the purchasing process went off without a hitch - at least on Apple's end. AT&T, meanwhile, was hounded with problems activating service.
On Friday, AT&T was quick to pin the blame on Apple. "There's a worldwide issue with iTunes that Apple is working to resolve," an AT&T representative said in an e-mail. Apple did not respond to a request for comment.
Early hangups aside, one analyst predicted Friday that the second version of the iPhone will have a stronger debut than its predecessor.
One major reason: Apple is releasing the 3G model around the world on Friday. The original iPhone was rolled out from country to country over the course of the last year.
"Based on on pent up demand, expanded distribution, lower pricing," RBC analyst Mike Abramsky wrote in a research note Friday, "Apple ships 1 million 3G iPhones in the first weekend." Abramsky said that would be roughly four times the number of iPhones shipped during the same time frame last year.
Apple sold more than 6 million original iPhones.
Other analysts warn that expectations for the new iPhone are too high. For one thing, the economy is a lot weaker than it was a year ago. Consumers may not no so eager to shell out $2,200 or more for the iPhone with a mandatory two-year subscription.
First Published: July 11, 2008: 9:45 AM EDT
As eager buyers flocked to Apple stores, news sites chronicled reports that Apple's iTunes store was struggling with a massive outage to its activation system.
Apple's new iPhone is cheaper and built on third-generation, or 3G, technology that is faster than the original iPhone's network.
As Fortune.com first reported, AT&T, the iPhone's exclusive carrier in the United States, has cut the price of the iPhone in half: an 8-GB model sells for $199, or $200 less than the original iPhone. The 16-GB version costs $299.
The Apple Store on New York City's tony Fifth Avenue, which drew a crowd of 150 people just after 5:00 a.m. ET, was moving customers through the line in about 10 minutes per customer when the doors opened at 8:00 a.m., according to Fortune's Philip Elmer-DeWitt.
Apple employees clapped and cheered as shoppers poured in - just like they did when the iPhone launched in June 2007
High expectations
But problems soon appeared. Elmer-DeWitt, who live-blogged from the store, was one of the first to report difficulty setting up his new phone. He was told, along with other customers, to go home and try to activate their devices later.
Elmer-DeWitt was able to activate his phone about three hours into the process. By early afternoon, there were more anecdotal online reports of users completing the activation process.
The system crash affected as many as 70 countries where the new iPhone debuted Friday, and hobbled owners of the original iPhone and the iPod touch looking to upgrade their software.
In other Apple news, users attempting to sign up for MobileMe, a $99-a-year service that synchs e-mail and other data across Mac devices, also encountered technical problems, according to the Associated Press. Apple began selling the service Friday.
The iPhone 3G rollout was in stark contrast to last year's debut, when hordes of eager buyers camped out for days at Apple stores around the country and the purchasing process went off without a hitch - at least on Apple's end. AT&T, meanwhile, was hounded with problems activating service.
On Friday, AT&T was quick to pin the blame on Apple. "There's a worldwide issue with iTunes that Apple is working to resolve," an AT&T representative said in an e-mail. Apple did not respond to a request for comment.
Early hangups aside, one analyst predicted Friday that the second version of the iPhone will have a stronger debut than its predecessor.
One major reason: Apple is releasing the 3G model around the world on Friday. The original iPhone was rolled out from country to country over the course of the last year.
"Based on on pent up demand, expanded distribution, lower pricing," RBC analyst Mike Abramsky wrote in a research note Friday, "Apple ships 1 million 3G iPhones in the first weekend." Abramsky said that would be roughly four times the number of iPhones shipped during the same time frame last year.
Apple sold more than 6 million original iPhones.
Other analysts warn that expectations for the new iPhone are too high. For one thing, the economy is a lot weaker than it was a year ago. Consumers may not no so eager to shell out $2,200 or more for the iPhone with a mandatory two-year subscription.
First Published: July 11, 2008: 9:45 AM EDT
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