Apple Unveils iPod-Cellphone

SAN FRANCISCO – Apple Computer Inc. (AAPL) on Wednesday unveiled a cellphone that plays music like an iPod and a pencil-thin "iPod Nano," both aimed at extending its domination of the digital music market.

The phone, developed with Motorola Inc. (MOT), can store up to 100 songs and has a color screen, stereo speakers, stereo headphones and a camera. It is Apple's long-awaited foray into the wireless realm.

But some said the silver phone was not stylish enough for the high expectations set by Apple's iPod and Motorola's slim flagship Razr phone, and others complained about its song capacity since iPod users are used to carrying thousands of songs.

"It doesn't have the emotive cachet that the Razr or the iPod has," said Yankee Group analyst John Jackson. "When you whip this out in the bar, nobody's going to say, 'That's a cool device."'

The Nano, whose slim form generated some buzz at the product release in San Francisco, can hold up to 1,000 songs.

No. 1 U.S. mobile service Cingular Wireless, a venture of SBC Communications Inc. (SBC) and BellSouth Corp. (BLS), will be the exclusive U.S. carrier of the phone, which it will sell for $249.99 to customers who sign up for a two-year service contract.

The iTunes phone, called the Rokr, will be available in Cingular stores on Thursday.

Cingular does not make money off songs played on the phones, but hopes they will help boost sales and reduce customer defections to rival services. One analyst said it could become Cingular's top-selling phone by next year.

"If this phone is easy to use, at this price I think it will fly off the shelves," Charter Equity analyst Ed Snyder said. "Cingular will reap the benefits of the combination of Motorola and Apple's brands."

The phone does not allow for wireless downloads, but it does eliminate the need for carrying two separate gadgets.

Music is expected to be one of the hottest new features in mobile phones, which already sport everything from cameras to video players.

Apple, which has remade the music industry with a 75 percent share of the digital music player market, has to keep up a steady pace of innovative new music products to maintain the level of growth investors now expect.

Chief Executive Steve Jobs (search) also said on Wednesday that Apple would integrate its products with cars on an aggressive timetable so that some 30 percent of new cars shipping in 2006 in the United States would be compatible with iPod products.

Apple said it was teaming with carmakers Acura, Audi, Honda and Volkswagen to integrate its iPod products into their car stereos for 2006 model lines.

It expects that more than 5 million cars will ship with iPod support in the United States in 2006.

Apple, which has sold more than 21 million iPods since introducing them in 2001, keeps new products under tight wraps before unveiling them at carefully staged events.