iPhone 4 Debuts to Tepid Surprise

This is a post from Mike Schuster at Minyanville.

This Apple (Nasdaq: AAPL) conference was truly like no other.

Never before has this large of a cat been let out of this voluminous of a bag. How could Steve Jobs — a man of shrouded devices and riotous unveilings — entice a crowd with a device that millions have pored through weeks in advance?

Keep in mind, these are Apple fans. It’s not that difficult.

Today in San Francisco’s Moscone Center, Jobs performed to a crowd that was uncharacteristically a few steps ahead of the Apple chief himself. But as always, he had a few tricks up his turtleneck sleeve.

And at least one he didn’t plan for.

The conference began as expected — with pleasantries about the iPad. Two million sold, translating to one every three seconds, and 8,500 native iPad apps currently in the App Store. News footage accompanied by a testimonial sent to Steve via email:

“I was sitting in a café with my iPad, and it got a girl interested in me. Now that’s what I call a magical device!”

“So there’s proof,” Jobs said to huge cheers. Presumably, no one in the crowd thought of the Porsche driver who will sway this material girl’s opinion a week from now.

And you may be wondering how long it took for a direct slam against Google (Nasdaq: GOOG). About eight minutes.

After demonstrating an app called The Elements, Jobs displayed a pull quote from one of its developers, Theo Gray at Wolfram Associates. “I earned more on sales of The Elements on the iPad in the first day than from the past 5 years of Google ads on periodictable.com.”

Next, Jobs addressed some concerns over the App Store approval process. He explained that some apps aren’t met with approval because of three main reasons: the app doesn’t function as advertised by the developer, use of private APIs, or the app crashes. Nonetheless, Jobs said that out of the 15,000 apps that are submitted to Apple each week, 95% are approved within seven days.

Still, it’s hard to cheer up app developers who have an affinity for Adobe Flash (Nasdaq: ADBE).

As time ticked by, Jobs continued to build suspense for the main event.

He brought out Netflix (Nasdaq: NFLX) Chief Reed Hastings to demo the Netflix app debuting this summer on the iPhone. Off the success of the version for the iPad, the Netflix app allows users to control their queue, stream video, and pick up where they left off on other Netflix-compatible devices.

Available on both Wi-Fi and 3G networks, this will certainly wreak havoc on AT&T’s (NYSE: T) new data limits.

Two game developers took the stage to showcase their new games. Zynga’s Mark Pincus showed off his FarmVille app — able to sync up with Facebook — and Activision’s (Nasdaq: ATVI) Senior Vice President Karthik Bala played a little air guitar while demoing the upcoming version of Guitar Hero for Apple mobile devices.

At that point, Jobs was ready to talk turkey about smartphone market share. Google enjoyed a nice press bump after a report showed that Android devices outsold iPhones in 2010’s first quarter, but according to Nielsen, the iPhone is still far ahead of Android devices in terms of US market share — wedged between Research in Motion’s (Nasdaq: RIMM) 35% and Windows’ (Nasdaq: MSFT) 19% share with a 28% share.

It was Jobs’ way of leading in to formally introducing the iPhone 4… to people who are already familiar with the device. He even joked, “Some of you have already seen this.”

The iPhone 4 is almost everything we already know about the device. While remotely liveblogging the event, Jason Chen at Gizmodo — not invited to the event for some reason — wrote, “On the front there is a front facing camera, a microSIM tray on the side, camera and LED flash, microphone (and screws!) on the bottom, headset jack, second mic for noise cancellation and a sleep/wake button.”

Summing it up, he wrote, “Exactly the same as we saw,” and reiterated a few minutes later, “By the way, in this semi-downtime, just wanted to mention that all the specs and design things of the iPhone 4 unit we saw matches up exactly to what’s being unveiled now.”

But a few details were new to the crowd.

The device is 24% thinner than the 3GS model; Jobs claimed it’s the “thinnest smartphone on the planet.” The seams along the edge — contradictory to many of Apple’s sleek design choices — act as integrated antennae. The new display contains four times as many pixels within the same amount of space, which influenced the futuristic title “Retina Display.” Jobs demonstrated the increase in sharpness by stating that, at 326 dots per inch, it exceeds the capacity of human vision at a field of 10 to 12 inches.

Not sure it deserves the overly fancy name “Retina Display,” but it will coincide nicely with the new iBooks app on its way to the iPhone.The battery is larger as already noted in the leaked prototype, which equates to 40% more talk time, six hours of 3G browsing, 10 hours of Wi-Fi browsing, 10 hours of video, 40 hours of music, and 300 hours of standby.

With detail after unsurprising detail, Jobs landed the crowd with an unexpected jab. Rather than just keep the old accelerometer in the older models, Apple has added a 3D gyroscope capable of measuring rotation and movement along six axes. Jobs showed off his handheld display of a Jenga tower tilting, rotating, and matching his movements.

Then another surprise. This time, much bigger.

The camera is boosted from three megapixel to five, and with the added flash — or “backside-illuminated sensor,” as Apple has dubbed it — Jobs beamed that it will also record 720p video at 30 frames per second. The flash becomes a camera light, hence its new name. And when Apple engineer Randy Ubillos unveiled the iMovie app for the iPhone and ran through its features on a few video clips, the crowd went nuts.

Easily the showstopper for the day. Except for another. In the middle of the presentation, the unthinkable happened. For Jobs, that is. For every other iPhone user, it’s come as expected.

The network connection failed.

Visibly aggravated, Jobs asked the crowd to get off Wi-Fi for a moment as he tried to load the New York Times website. Frustrated with the blank screen, Jobs asked to his side, “Scott, you have any ideas?” In response, someone in the crowd shouted, “Verizon!”

To Jobs’ benefit, the iPhone 4 doesn’t currently have a wireless blood pressure meter. But he got his revenge — not just to the Verizon (NYSE: VZ) guy, but the whole crowd. After demoing the iMovie app, Jobs put on his schoolmarm hat, turned off the Wi-Fi, and asked everyone to set their laptops on the ground or, otherwise, there won’t be anymore demos.

Whether he asked everyone to spit out their gum has yet to be confirmed.

The iPhone OS has been redubbed iOS 4 and Jobs ran through its aspects people already know. Tethering, multitasking, folders, etc. Mentioning Yahoo (Nasdaq: YHOO) and Bing’s integration as default searches didn’t bring much excitement to the crowd.

But not as much as the lengthy iAd demonstration.

Jobs wowed them at the end with a demonstration of the front-facing camera and the new iPhone video chat capabilities. Giving fellow Apple exec Jonathan “Jony” Ive a quick call, he showed off the long awaited face-to-face conversations in store for future iPhone 4 owners. And in support of AT&T’s hampered 3G network, the feature will be Wi-Fi only.

Surely, Apple isn’t too happy about that limitation.

Prices for the iPhone 4 will run the same as the 3GS: $199 for the 16GB model and $299 for the 32GB model. No 64GB internal capacity. But perhaps in light of AT&T’s unpopular decision to discontinue the unlimited data plan offer, it’s moved upgrade eligibility up six months to accommodate existing customers whose contracts end in 2010. Although it’s good news for customers itching to upgrade, some analysts said it’s merely a ploy to keep customers locked in another two years as Apple weighs its options on Verizon, Sprint (NYSE: S), or T-Mobile (NYSE: DT).

It’s too bad that two iPhone prototypes had to be leaked prior to this conference. Chances are, the new features for Apple’s upcoming smartphone would’ve made much more of a splash.

But there’s also one in white. Not many people saw that coming.

The iPhone 4 goes on sale June 24.

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