iPhone Activation Woes Hit Early Buyers (Part 2)

Some of the first people in the U.S. to purchase the iPhone 3G walked out of an Apple Store in New York disappointed Friday when Apple's plan to activate the new devices in stores backfired.

iPhone Activation Woes Hit Early Buyers

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The consensus of about a half dozen people standing in line was that most users want the new iPhone mainly for the 3G (third-generation) speed. Several people said they own an iPhone, but want the speed of the new version. That was also the issue at the top of mind for some first-time iPhone buyers.

"It's 3G now, it's faster," said Ryan Tracy, the president of Cheech and Chong dot com, a retail and marketing company and Web site for the Cheech and Chong comedy team. Tracy said he was standing in line for several hours before the store opened.

"There's also a lot of other goodies you can download," Tracy said, referring to the iPhone 2.0 platform that lets users download applications from the iTunes service.

He also agreed with other people in line that the lower price was not the biggest issue. Asked whether the combination of applications, speed and lower price will make the new iPhone into a hot product, Tracy said "It's already a hit product, everyone's talking about it, everyone's here."

Software problems with the network of telecommunications operator O2 at Apple's London flagship store also caused activation delays, where the iPhone 3G also went on sale at 8 a.m. local time. O2 is the exclusive network operator for the iPhone in the U.K.

Problems with activation could affect the number of iPhone 3Gs Apple sells over the weekend if people decide to wait a few days for the problems to be resolved before making their purchases.

RBC Capital Markets projected that Apple may sell more than 1 million phones worldwide over the first weekend to meet pent-up demand, according to a report by analyst Mike Abramsky. The number could be four times more than the 270,000 iPhones that were sold at launch last year, he wrote.

But limited supplies could frustrate buyers as Apple shipped only 1.5 million iPhone 3Gs, Abramsky wrote. As supplies normalize, iPhone 3G is set for long-term success, and the company could ship up to 5.1 million iPhones in the quarter, according to the report.

More than half of current iPhone owners are likely to upgrade to iPhone 3G, according to a study from ChangeWave Research. Around 55 percent of current iPhone buyers said they are likely to upgrade to 3G iPhone, with more than half of them not planning to wait long, according to the research.