Apple's next iPhone crop must fight off more pests

When Apple Inc. launched an updated iPhone at its annual gathering of software developers last June, its biggest competitor was the iPhone that Apple had introduced the year before.

That won't be the case at this year's conference, which opens Monday. Now the next version of Apple's touch-screen phone has to outdo a slew of rival gadgets - including one that comes out this weekend - that emulate or improve on some of the iPhone's best features.

Much is riding on Apple's ability to appear well ahead of its competitors. Apple's shares have jumped 73 percent since March - even in the absence of revered CEO Steve Jobs, who is on medical leave - largely because of high expectations for the iPhone. Just two years after entering the fray, Apple enjoys a 19.5 percent share of the smart phone market, according to IDC, and investors are betting on a continued run of success.

"Apple, from a practical standpoint, has consistently tried to stay one to two years ahead of the competition on both the hardware and software levels," said Tim Bajarin, president of Creative Strategies and longtime Apple analyst.

Apple, in keeping with its usual secrecy, isn't saying what will be unveiled at its Worldwide Developers Conference in San Francisco.

Usually the event is the company's stage to demonstrate computer software changes that aren't widely relevant until programmers use them to build neat new applications. Last year, though, Apple used the conference to announce the iPhone 3G, and many Apple-watchers expect the Cupertino, Calif.-based company to produce another version this time, and to reveal more about the new iPhone operating software it previewed in March.

Since last year's developers conference, rival phone makers galvanized by Apple's challenge have responded with formidable touch-screen devices of their own, including Research In Motion Ltd.'s BlackBerry Storm and T-Mobile USA's G1, which runs Google Inc.'s Android software. Palm Inc. is coming out with its new Pre on Saturday and promises to follow with similar devices using its flexible webOS operating system.

For now, RIM is still by far the top seller of feature-packed smart phones, with 55.3 percent share, according to IDC. Palm has 3.9 percent.

The Palm Pre wowed many reviewers with its slide-out keyboard and ability to run more than one program at a time, which the iPhone cannot do. So how can Apple keep the edge in mojo? Some wished-for features include a faster processor, more data storage, video recording and an auto-focus camera.

Smart-phone competitors are not the only ones crowding Apple. Over the past year, another category of small wireless computers has blossomed: "netbooks," which are light little laptops designed for checking e-mail and surfing the Web on the go. Some cost as little as $100 with a cellular data plan, which beats the starting $200 price of an iPhone. Apple has said it isn't interested in making a sub-$500 notebook computer with a small screen and keyboard, but that could change.

Apple also will give the 5,000 developers expected at the conference a closer look at Snow Leopard, the forthcoming update to its Mac OS X operating system, just as the PC industry is gearing up for the Oct. 22 release of Microsoft Corp.'s Windows 7.

Microsoft tried to give Windows 7 a more attractive user interface, an area where Apple has long been seen as the leader. After years of stinging Apple ads that pit a hipster Mac character against a hopelessly dorky PC guy, the Redmond, Wash.-based software maker also has bitten back at Apple with a series of TV commercials showing people saving money by choosing Windows PCs over expensive Macs.

Questions remain not only around what will be unveiled in San Francisco but who will do the unveiling. Apple's top marketing executive, Philip Schiller, is scheduled to deliver the opening keynote, but a cameo from the CEO wouldn't be out of character for Apple, which thrives on showmanship.

Jobs attended last year's event but isn't officially on the calendar this time. The 54-year-old survivor of pancreatic cancer went on leave in January to deal with a severe weight-loss problem that left him looking wan. Since then, Apple has repeatedly said he is expected back in his day-to-day duties at the end of June.

Bajarin, the analyst, doesn't expect Jobs to appear next week. Then again, he doesn't expect Apple to announce a new iPhone on Monday, either.

"A lot of the rumor mill is based on wishes," he said. "People are wishing for Steve Jobs to show up. They're wishing for the next tablet (PC) from Apple. They're wishing for an iPhone."