iPhone 2.0: Its Cheap! And Even Cooler! And Business-y!

So…the new version of the iPhone will retail for $199 (8GB). Screeeeeech. That was the industry and the public at large saying: Say what?

Announced by Steve Jobs today at the Apple developer’s conference, iPhone 2.0 also provides new functionality—the expected 3G capability (from the “it’s about time” file), plus GPS and a host of new compatible applications, including a mobile version of the Slingbox take-live-TV-with-you-anywhere functionality and an eBay auction portal just for iPhone bidders. Other new applications unveiled by Apple include Loopt, for location-aware friend tracking, and mobile blogging from TypePad.

Previously announced business-friendly capabilities like native VPN and corporate e-mail synching are part of the package too. Also, a new developer community, which will come online in a few weeks, will take advantage of the Apple Inc. SDK announced in March to write native applications for the device, opening up a world of possibilities for users, dare we gush. For details on the latter two items, click here.

While commanding but a slender percentage of the overall device market share (and of overall Apple revenue, for that matter), the importance of the iPhone lies here: It could be said to be the Nirvana of the handset market, representing a seminal turning point in the industry. What came before—that means you, RAZR—will soon look as dated as hair metal bands. The turn towards embracing business helps that image—hype or not—along.

“It has been challenging for competitors to deliver products that rise to the expectations the iPhone is creating, without appearing to chase the innovations of a vendor that holds less than half a percent of the worldwide mobile phone market,” said Kevin Burden, director of mobile devices at ABI Research. “However, the iPhone is one of those rare, disruptive pieces of technology that first raised the bar for consumer-oriented smartphones and is now looking to meet the expectations of enterprise users through support for iWork and Office documents, as well as push support for Exchange, and wirelessly syncing of email, calendar, contacts and gallery content through its new MobileMe service for non-Exchange users.”

But the shock lies in the fact that there’s more functionality in iPhone 2.0 for less cost, and for one of the most coveted, hyped, talked about devices on the market. The lower price tag—which Applephiles can take advantage of beginning July 11—is expected to make the iPhone into more of a mass-market device, while appealing to business users and consumers alike. But ”smartphone” and “mass market,” while not necessarily mutually exclusive, haven’t exactly been used too often in the same sentence. If Apple succeeds in its bid to become the populist workhorse it’s setting out to be, that could spell big trouble for rivals like Nokia, RIM and Microsoft Corp., all of which suffer the taint of being known as corporate and corporate-only oriented entities when it comes to smartphones, despite best-laid strategies. Not to mention the threat a cheap iPhone presents to the let’s-not-kick-it-while-it’s-down Motorola Inc., whose recent troubles have resulted in plans for its handset division to be isolated and quarantined. And then there’s Samsung, which today released the Omnia—now, Samsung is popular with the kids and the older set alike, with the slider innovation and sleek design. But it has yet to release a killer smartphone. The not-coincidentally-launched Omnia offers up a 5-megapixel camera, GPS and Wi-Fi connectivity.

“This looks like it will be an exciting summer, fall and winter with all these new devices start to compete,” said analyst Jeff Kagan. “We’ll keep our eyes open.”

AT&T Inc. will retain excusive rights to the iPhone in the United States but said it would be covering the lower price tag with increased subsidies; it said it would cut adjusted earnings by about 11 cents for the next two years to compensate. Apple meanwhile will launch the iPhone in dozens of other countries and multiple overseas carriers in the coming months, Jobs said.

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