Smartphone Wars: After Apple's iPhone Upgrade

Research In Motion stands tall, Palm's problems continue.

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Newer, faster, cheaper.

Apple's $199 3G iPhone and MobileMe, an upgrade version of its Mac syncing service, should successfully give shares a shot at a new leg up. It's simply too tough to argue that sales won't be absolutely huge now that the iPhone has moved from must-have status gadget to can-have everyday phone for tens of thousands of new users.

Apple gained 1.5 percent today, though shares fell after the hype ahead of the announcement. (Here's the big moment, complete with Steve Jobs, at AllThingsD.com.)

So what about the competition?

Research In Motion, maker of the BlackBerry, has kept up with Apple until now, and it looks like the latest upgrade by its chief rival marks a continuation of hostilities rather than a victory. The argument goes that a cheaper iPhone will probably eat into BlackBerry sales at the consumer level, where carriers are already giving away models like the Pearl at low or no cost after rebates, and at the professional level, where Apple sales have started to rise.

But the smartphone market is still just getting started. Citigroup raised its price targets for both RIM (heading to $165) and Apple (heading to $287). Consider Citi's iPhone sales estimates: In the second half of calendar '08, sales jump to 12 million from 8 million. For '09, Apple moves 23 million units vs. 16 million, and in '10 sales hit 28 million iPhones. Other analysts put the number even higher.

The loser here is Palm. It might still manage to carve its niche among carriers that don't offer the iPhone, but the future looks like it belongs to RIM and Apple. Analysts at S&P left shares of Palm at "sell" after the announcement and upgraded Apple to "buy" from "hold."