Why the iPhone won't work

Apple Computer Inc. (NASDAQ:AAPL) is about to announce a deal that will launch its much anticipated iPhone [subscription required] and it will be available to subscribers of the Cingular cell service from AT&T Inc. (NYSE:T). Apple hopes that its new phone will give it the chance to win share in a global market where nearly one billion phones were sold last year.

Apple needs something new. With 70 million iPods sold, the market for its portable music player may be reaching saturation and growth in sales could begin to slow as early as this year.

But, Apple is not entering a field that it can easily dominate because it will be up against the likes of Motorola Inc. (NYSE:MOT), Nokia (NYSE:NOK), and Sony Ericsson (NYSE:SNE)(NASDAQ:ERIC). Nokia sold 40 million multimedia phones last year. That gives the company a huge lead in getting to the music download market. Nokia has 850 million phones in use worldwide.

Motorola is putting a big push behind multimedia cellphones. With its problems selling more RAZRs and weak earnings, it has every reason to push into the newer market of music downloads. Industry observers believe that Motorola must have a higher-priced multimedia phone success to boost margins.

The iPod had an "early mover" advantage when it was launched in 2001. It has little more than a "late mover" advantage entering the cell phone business in 2007. And, being cool won't be good enough.

Douglas A. McIntyre can be reached at 24/7 Wall St.