Sector Snap: Most handset stocks decline

Apple shares fell $3.17 to $173.46.

The device--which is cheaper, works over a 3G, or third-generation, wireless network and includes GPS capabilities--went on sale early Friday.

A spokesman for AT&T Inc., which is the exclusive U.S. iPhone carrier, said that a global problem with Apple's iTunes servers were preventing the devices from being fully activated in stores, as had been plan. The iPhones are available at Apple stores and at AT&T stores.

The spokesman, Michael Coe, said employees are telling purchasers to go home and perform the last step by connecting the phones to their own computers.

In a client note, RBC Capital Markets analyst Mike Abramsky predicted first-weekend sales of the updated iPhone will be four times that of the original iPhone, citing "pent up demand, expanded distribution, (and) lower pricing."

The analyst expects Apple to sell 1 million or more iPhones over the weekend, and to ship 5.1 million iPhones in the company's fiscal fourth quarter.

He expects that limited stock of the device "may frustrate buyers." He added the launch at 28 carriers in 22 countries "also raises the risk of logistical stumbles, including buyer frustration from longer wait times expected from iPhone 3G in-store activation requirements."

Abramsky rates the stock "Outperform."

Meanwhile, shares of BlackBerry smart phone maker Research In Motion Ltd. fell $6.52, or 5.6 percent, to $110.61, while shares of competitor and Treo maker Palm Inc. fell 8 cents, to $5.53.