Apple Hints It Will Soon Begin Selling IPhone Software

SAN FRANCISCO -(Dow Jones)- Apple Inc. (AAPL) on Monday took a major step forward with its long-awaited iPhone software store, but it hadn't yet unveiled a 3G version of its iPhone.

During a presentation to developers in San Francisco, Apple Chief Executive Officer Steve Jobs dropped broad hints that Apple's new software "App Store" on iTunes is now accepting third-party software, which will ultimately be sold to iPhone owners, once the coding's been approved by Apple. Gamker maker Sega intends to sell a $10 game, while auctioneer eBay Inc. (EBAY) will have a free service for iPhone, once the store opens for business.

These and other steps outlined Monday at a developer conference are designed to help Apple meet its goal of selling at least 10 million of the combo cell phone and digital media players this year, and also demonstrate how central the iPhone have become to Apple's future.

"As you know, there's three parts to Apple now; the first part is the Macintosh, the second part is our music businesses and the third part is now the iPhone," Jobs said.

Indeed, the number of iPhones sold in Apple's last quarter was nearing those of its Macintosh computers. However, Apple's bottom and top line are still largely driven by computer and iPod digital media player sales, which still generate most of Apple's revenue. IPhone revenue came in around $241 million during Apple's last reported fiscal quarter, and represented about 2% of its sales last quarter.

During a presentation to developers in San Francisco, Jobs officially opened up its iPhone software store, which will be stocked by programs created by third parties that have agreed to have their software distributed through Apple's iTunes online store, and share some of the profits on any sales with Apple. Several different applications were demonstrated on stage Monday, and thousands are expected to become available.

Demonstrations of typical applications on stage focused on location-based services, which uses the iPhone's ability to determine its location.

Pricing for the software will be determined by developers; in general, smart phone software usually costs between $3 and $15 per program. Some of the features will focus on location-based services, Apple executives said.

The store, which is a part of Apple's iTunes, is an important development given iPhone software add-ons, like the calendaring features or games, which in the long run generate more dollars for Apple than actual iPhone sales, according to some estimates. For every iPhone sold, it's been suggested Apple gets about $ 100 from the upfront payment costs, and then another $200 over the life of the phone in the form of cell phone data subscriptions and other service fees some carriers have agreed to share with Apple.

The store also helps Apple catch up, in one way, to its rivals. RIM and Nokia already have thriving developer communities and a variety of online areas to buy their goods. As many as 1,000 applications are expected right off the bat. But with the combo 3G iPhone and new software store, Apple stands a better chance at making in-roads with enterprises.

"The productivity benefits of software could drive accelerated adoption of smartphones by worldwide corporate users," said Pacific Crest Securities analyst Andrew Hargreaves. "This could drive upside to our estimates for iPhone units and the total smartphone market."

It's also widely expected that Jobs will also unveil a new iPhone, now compatible with the fastest of the world's cellular networks. The new iPhone is expected to be available in about two weeks in about 70 countries. In a big change in its tactics, Apple's seen as letting carriers offer rebates and otherwise subsidize the iPhone by as much as $200.

Blogged with the Flock Browser