UPDATE: Tempered Optimism Greets Apple's iPhone Push

SAN FRANCISCO (Dow Jones) -- Apple made a big splash this week by unveiling a new software upgrade for the iPhone meant to make the device more attractive to the corporate market and more accessible to its community of developers, but investors didn't flock to the company's stock on Friday.

Apple shares gave up 40 cents to $120.41 one day after the company made public its software development kit, or SDK. The SDK includes support for Microsoft's Exchange ActiveSync, which allows for emails, contacts and calendars to be "pushed" to an iPhone user, making it easier to access such information.

The release of the SDK was seen as necessary for Apple to appeal more to potential business customers and to meet its goal of selling 10 million iPhones this year. Some analysts who follow Apple had begun to question whether it would reach the 10 million mark due to issues such as strong competition and signs of lower-than-expected production levels at Asian manufacturers.

A beta version of the new software package is available now, with the full version set for release as a free download in late June. Apple Chief Executive Steve Jobs said developers will be able to join the iPhone development program for a $99 fee, and will keep 70% of all sales of applications developed for the iPhone.

Gene Munster of Piper Jaffray said the new functionality will improve the types of features available on the iPhone and should help spur Apple toward hitting its iPhone sales goal for the year. Munster holds an outperform rating and $250 a share price target on Apple's stock.

Many company watchers see Apple's plans to add push mail capability to the iPhone as a direct shot at Research In Motion's line of BlackBerry handheld devices. Munster said that Apple's move puts the device on par with Windows Mobile devices, but that the company still faces challenges in overcoming BlackBerry's market dominance.

"Most businesses using the BlackBerry platform have also purchased specialized hardware, which represents a significant hurdle for widespread iPhone adoption in business environments," Munster said in a research note.

Apple took strides to show that the iPhone hasn't been ignored by the business community. At Thursday's event to show off the new SDK, Apple said that companies such as Genentech, Nike and Walt Disney have already signed on as iPhone customers.

But American Technology Group analyst Shaw Wu said that Apple's adding of support for Microsoft Exchange will plug a "key weakness" that has kept the iPhone from gaining a larger piece of the corporate market since its debut last June 29.

"We believe Apple's implementation of ActiveSynce is superior to existing ActiveSync implementations out there," Wu said.

However, Wu agreed with Munster regarding the odds that the iPhone will soon displace the BlackBerry as the wireless device of choice for much of the business market, saying that it remains to be seen if the iPhone's email capability will be able to compete with that of the BlackBerry.

"IPhone is being touted as having a simpler [push email] architecture," Wu said. "While this is important, Apple has a long road ahead in making inroads in enterprise [markets]."

Wu holds a buy rating and $175 a share price target on Apple's stock.

(END) Dow Jones Newswires

Posted to the site on 8th March 2008