It's time: Apple's iPhone 3G S debuts

Crowd lines up in New York to be the first to get new version of smartphone, as Apple tries to keep itself in the game.

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By David Goldman, CNNMoney.com staff writer

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Lines outside the Apple Store on New York's Fifth Avenue were long, but there were far more barriers than people.
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Luis Palacios was one of the first to get a new iPhone 3G S. He had been waiting on line for more than five hours.

NEW YORK (CNNMoney.com) -- Apple is hopeful that the new iPhone 3G S, which was launched Friday, will help it fend off the increasing competition in the smartphone world.

It worked the last time. After Apple released the iPhone 3G in July 2008, its share leapt from 7.4% in the second quarter of last year to 30.1% in the third quarter, according to IDC data.

But this time, the iPhone isn't the only new hot gadget around. The 3G S launch comes less than a week after rival Palm (PALM) unveiled its much ballyhooed Pre smartphone on the Sprint (S, Fortune 500) network, and RIM (RIMM) announced it will debut the new BlackBerry Tour on Sprint and Verizon (VZ, Fortune 500) in the coming months.

And indeed, stiff competition has eroded Apple's smartphone share down to just 19.5% in the first quarter of 2009, compared to 55.3% for RIM.

Still, Piper Jaffray's senior research analyst Gene Munster said he expects Apple to sell 500,000 iPhones over the weekend. That's half of what Apple sold during the 3G launch, though that phone launched in 21 countries compared to eight for the 3G S. But that's far more than the 50,000 Pres that analysts estimate Palm sold in the first two days of sales.

Lining up for the iPhone: Customers lined up at Apple Stores around the world to be among the first to own the new iPhone.

Apple (AAPL, Fortune 500) began its rolling release of the iPhone 3G S in the United States at 7 a.m. ET. It then debuted in successive time zones each hour. (For more on the iPhone 3G S launch, see the Apple 2.0 blog)

About 300 people stood outside the Apple Store on New York's 5th Avenue -- some of them since early Thursday -- waiting for the doors to open. Inside the store, employees were seen being briefed about the new phone's features before selling it to customers.

"I got on line at 2 a.m.," said Luis Palacios, 22, of New York, who was one of the first to emerge from the store with a new iPhone. "It was really early, but it was worth it for the video."

Though lines were long, they were shorter than anticipated -- the Apple Store put out many more yards of metal barriers than necessary. An Apple Store employee said it would likely take about three hours to sell iPhones to the customers who were lined up before the store opened. He said the line was longer during the last iPhone release in July.

Joining the would-be buyers were lots of reporters looking to see if the new device, unveiled at the Apple developers' conference in San Francisco earlier this month, would attract the hubbub of previous iPhone versions.

The 3G S version comes equipped with a 3-megapixel camera with video capturing and editing capabilities, improved battery life with up to 12 hours of talk time and 30 hours of audio, voice-command control, and a built-in digital compass.

"The new iPhone is redefining what people can do on a phone," said Chad Evans, an app designer for mlb.com. "We're now able to live stream complete games on a handheld device."

The 16-gigabyte iPhone 3G S can be had for $199 with a new contract with exclusive carrier AT&T. The 32-gigabyte version costs $299 with a new activation.

Apple will also continue to sell a second-generation iPhone 3G with 8 gigabytes of memory for $99.

The new OS 3.0 operating system, which was launched last week, comes installed on the iPhone 3G S, and is available for free download on all existing iPhones. OS 3.0 enables users to cut, copy and paste for all applications, which iPhone users have long demanded. The operating system also features an undo gesture, which will undo the last action by shaking the phone. To top of page

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