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Apple's New iPhone: Let the Frenzy Begin

The tech world is buzzing about the next generation iPhone. For the companies that make accessories and software, the much-anticipated sequel could be a billion-dollar boon. A look at how they're planning to cash in.
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Robert Pedersen is ready to drive around San Francisco in a converted trailer covered in his company's new protective iPhone case. The president of ZAGG, a Salt Lake City-based design firm, Pedersen is looking to cash in on the hype surrounding the much-anticipated, new-and-improved iPhone.

He'll be joined by hundreds of other mobile phone accessory makers, all hoping to reignite some of last year's sales frenzy  that saw shoppers buying add-ons for a product months before it even reached the store shelves.

By contrast, this year's market buzz is surprisingly muted, Pedersen says.

"It's kind of like, this is just a sequel," Pedersen says, adding that there's less pressure this time around to get an early look at the device. "But it's still a really big deal for us."

Released June 2007, the iPhone has proven to be a major boon not only for Apple -- which sold more than half a million units of the iPod-cell phone hybrids within a week, and has since sold more than 5.4 million -- but also for hundreds of smaller firms that design and sell carrying cases, docks, and other inexpensive extras.

Apple has largely ceded the iPod and iPhone accessory market to these third-party manufacturers, though it continues to keep design and technical specs under wraps, fueling a continually swirling rumor mill.

This year alone, mobile phone accessories sales are expected to generate more than $40 billion in revenue, according to a recent study by ABI Research, a global market research firm based in New York and London. Rising steadily over the next five years, accessory sales are projected to double by 2012, with much of that growth driven by the iPhone and other smartphones that are propelling the market far beyond simple chargers, the study found.

"More people buying expensive smartphones and feature-rich devices mean greater demand for accessories that protect handsets, and also for accessories that enable the use of different features and applications on the handsets," says Shailendra Pandey, an ABI analyst who conducted the study.

While the popularity of the iPhone's extra-wide touchscreen is driving sales of screen protectors and scratch removers, its mix of capabilities is boosting demand for everything from earphones and headsets to memory cards, data connection kits, and USB chargers, according to ABI.

As always, the hype surrounding the launch has caused many manufacturers, along with countless tech bloggers, to double-guess the iPhone's new features. Last year, accessory makers had an unusually wide five-month development window between the time Apple CEO Steve Jobs announced the new device in January and the its eventual release the following June. That prompted many retailers to unveil iPhone cases, docking stations and speakers months before it hit the market. Others offered "pre-orders" for products that had yet to be designed or built.

Since the new version -- which market watchers have variously dubbed iPhone 2.0 and the 3G iPhone, in reference to a rumored souped-up data connection -- will undoubtedly retain many features of the original iPhone, most accessory makers aren't feeling the same pressure to get ahead of the game, they say.

"In many ways, the product is out and everyone's already seen it," says Rod Schecter, a spokesman for Gomadic, a Herndon, Va.-based charger manufacturer. "We're hoping most of our products will be compatible," he says, adding that the company's existing line of chargers can easily be tweaked to fit the new specs.

According to a spokesperson for Digital Lifestyle Outfitters, a Charleston, S.C.-based accessory maker that was bought by Philips last year and has partnered directly with Apple, many of its existing products will be compatible with the new iPhone "on day one."

In any case, accessory makers have learned to be nimble when dealing with Apple. Most are able to turn out new products within a week of getting their hands on the latest release.

Still, not all the features of the new phone are a closely guarded secret. In March, Microsoft announced a deal to provide built-in support for Exchange ActiveSync on the new iPhone, enabling remote access to business-class e-mail and other collaborative tools. Apple has also opened up the iPhone platform to third-party software. The move will allow everyone from game developers to banks to create iPhone versions of their Web-based applications. Intuit has already developed an iPhone edition of Quicken Online, its popular accounting tool.

With Apple expanding the iPhone into a mobile enterprise market  currently dominated by Research in Motion, maker of the BlackBerry, small tech firms are finding a host of new customers for network security tools, online agenda services and other business-friendly applications.

"I think there's not as much hype this year, but it's going to have a much bigger impact in the long run," says ZAGG's Pedersen. "These changes are going to bring a lot more people on board, and that's good news for accessory makers."




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