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iPhone: More Fun Than Phone


The Web surfing on the Apple device is great. But some users are now choosing to carry a second cell phone

Andre Charland just bought an iPhone 3G, the phone from Apple (AAPL) that hit the market on July 11. But the Canadian software executive isn't giving up his BlackBerry Pearl. He says that the BlackBerry is a "workhorse" for e-mail and phone calls, while the iPhone isn't as reliable. "I’ve just had dropped calls and issues like that," says Charland. "I have the iPhone mostly for fun," like watching video or browsing the Web.

The iPhone has been a huge financial success for Apple, with sales outstripping most expectations. But some users, such as Charland, have found that the iPhone 3G, for all its benefits, isn't that great a phone. In recent days people have filled blogs about Apple, as well as the company's own site, with complaints of dropped calls and failed attempts to get connections for their new iPhones. On Aug. 12, Nomura Securities analyst Richard Windsor flagged the issue in a research note, calling it a "worrying sign." He said the development would give breathing room to rivals such Nokia (NOK) and BlackBerry maker Research In Motion (RIMM) .

Back to a BlackBerry

The reason for the iPhone's reception problems is in dispute. Two sources, including one close to Apple, say the issue is a chip from Infineon that manages wireless communication. But a spokesman for Infineon (IFX), Guenther Gaugler, says the chip performs smoothly with some Samsung phones. The two sources, who estimate the glitch affects less than 3% of iPhone 3G calls or Web sessions, say Apple expects to fix the problem by sending a software upgrade to each iPhone.

It's too late for Ryan Shaw. The salesman bought the new iPhone shortly after it came out. But he says he couldn't get service in his house near Cleveland and that 40% of his calls were dropped. His wife is expecting a baby, so he couldn't afford to miss a call. He ultimately switched back to a BlackBerry and Verizon Wireless. "[The iPhone] was a cool toy," says Shaw. "But it's a phone, and that's what I needed it to be first."

Plenty of people are taking Charland's approach. They buy the iPhone as a portable computer for Web surfing, video, and music. But they carry a second phone to make calls. "People use the iPhone as a PC in their pocket," says analyst Trip Chowdhry of Global Equities Research. "[Apple] should change the name to iTablet. It's slightly mispositioned."

Kharif is a senior writer for BusinessWeek.com in Portland, Ore.

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