Smaller crowds greet new iPhone

Several hundred shoppers lined up outside Apple's stores in New York and San Francisco before their 7 a.m. opening, but the queues were shorter and moved more quickly than for the first iPhone in 2007 and for last year's 3G model.

This is my first iPhone purchase, said Adam Moore, a technology consultant who arrived at the Apple store in downtown San Francisco at 3:30 a.m. I've been in the industry long enough to know when to buy something. The software and the hardware have caught up... there's nothing like it.

Analysts had predicted smaller crowds for the launch of the new 3GS compared to earlier iPhones. For the first time, Apple and sole U.S. carrier AT&T Inc took preorders for the iPhone, helping some buyers avoid the first-day scrum.

The 3GS smartphone features a faster processor, longer battery life and the ability to take videos, but it offers a more modest technological leap over the second-generation 3G.

NPD analyst Ross Rubin said the turnout was nothing to sniff at. To have lines anywhere near the length of the ones we saw at the Fifth Avenue (New York) store is an impressive feat for any smartphone, he said.

Broadpoint Amtech analyst Brian Marshall, who was at the launch in San Francisco, agreed. He expects 500,000 3GS phones to be activated through the weekend and predicted the device would sell out in all channels -- which include Wal-Mart and Best Buy stores -- later on Friday or Saturday. He said it would take two or three days to restock.

By contrast, some analysts have estimated between 50,000 and 100,000 Pre smartphones from Palm Inc were sold in their first weekend earlier in June.

I thought the turnout was pretty good, Marshall said.

Neither Apple nor AT&T have given specific sales figures or targets for the 3GS, but the carrier said on Friday that early sales had exceeded its own expectations.

We've sold hundreds of thousands through our preorder process, said AT&T spokesman Michael Coe.

SMARTPHONE WARS

Cupertino, California-based Apple released its first iPhone two years ago, and it quickly became a consumer phenomenon. The second-generation 3G model was issued last summer.

Apple has sold more than 40 million units of the iPhone and iPod Touch, which uses the same software. The touch-screen phone competes with the more business-oriented BlackBerry from Research in Motion Ltd and the new Pre.

One of Apple's main competitive advantages is the breadth of its App Store, a collection of more than 50,000 easily downloadable programs, from games to business applications.

Eric Singley, product manager for mobile apps at the popular social network and customer review site Yelp.com, said it had had an iPhone app since the store opened last summer.

It's been great for us, it's added really meaningful traffic, he said, noting that Yelp is still working on its BlackBerry app and is studying a potential Pre app. We'll see what kind of numbers they're getting.

Along with the new iPhone release, Apple also halved the price on the 3G iPhone, released last summer, to $99. Rubin, the NPD analyst, said the 3G is welcoming in a new wave of iPhone customers that is less of a technology enthusiast.

The new 3GS went on sale in the United States and seven other countries on Friday.

Shares of Apple rose 1.3 percent in afternoon Nasdaq trading to $137.64. Shares of AT&T fell 0.9 percent to $23.92 on the New York Stock Exchange.

(Editing by Tiffany Wu, Brian Moss, Steve Orlofsky, Leslie Gevirtz)