The Future of Apple

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Apple raised eyebrows by using the iPhone name only weeks after Linksys, a division of Cisco Systems (CSCO), unveiled a series of phones designed to make Internet calls under the iPhone name (see BusinessWeek.com, 12/18/06, "Introducing the iPhone—But Not from Apple"). Cisco has owned the rights to the iPhone name since it acquired a company called Infogear in 2000. Apple has been negotiating with Cisco for rights to use the iPhone name but hadn't finalized an agreement before today's announcement.

A Cisco spokeswoman said no deal had been finalized before Job's appearance in San Francisco today. "Given Apple's numerous requests to use Cisco's iPhone trademark over the past several years and our extensive discussions with them recently, it is our belief that with their announcement today Apple intends to agree to the final documents and public statements that were distributed to them last night and which address a few remaining items. We expect to receive a signed agreement today."

Sweet Deal

Finally, there's the age-old question of whether Apple will limit its own horizons, through its closed business model, in which it creates devices designed to work only with its own iTunes software.

Still, just when rivals such as Microsoft are inching toward a walled-garden approach to selling entertainment-oriented products, Apple signed up key partners to ensure that the iPhone stands out when it comes to accessing the Internet. Google (GOOG) CEO Eric Schmidt, also an Apple board member, joined Jobs on stage in San Francisco. So did Yahoo! (YHOO) co-founder Jerry Yang, who announced a deal under which Yahoo Mail will be automatically forwarded to iPhone users.

The company seems to have worked out answers to other key questions as well. The five-hour battery life is within a couple of hours of many high-end smartphones. Most would-be customers are likely to be iPod owners who already sync their iPods each day. Then there's price. At $499, the iPhone costs a bit more than many smartphones, but it represents a sweet deal for power users who carry both a smartphone and an iPod and might prefer to carry just one device. Also, Apple has managed its product lines in the past in an effort to corral shoppers toward the products it most wants to sell. In 2005 it killed off the popular iPod mini to make way for the pricier iPod nano. Now, Apple clearly wants to sell phones—and it's going to have plenty of cards to play to do just that.

Click here to see a slide show of Apple's newest products.

Hesseldahl is a writer for BusinessWeek.com in New York.
With Peter Burrows in San Francisco.