Apple tweaks iPhone for business uses, seeking competitive edge

Apple Inc. wants the iPhone to become a business e-mail gadget — and a portable video game machine that might also help users manage their health records.

Cupertino-based Apple unveiled new software Thursday that reflects its intensifying effort to court business customers and placate third-party developers who want to build iPhone applications but have been locked out. A beta version of the software went out Thursday; the full version will be available in June.

With the announcement, Apple is foraying beyond the consumer cell phone market while simultaneously supporting innovations for the phone that could spur sales. But not all developers will be happy with Apple's approach, since the company will retain tight control over what programs go on the iPhone.

To help fuel development, venture capital firm Kleiner Perkins Caufield & Byers has created a $100 million "iFund" to support new companies developing the next generation of applications.

Kleiner Perkins partner John Doerr, who's managing the fund, said he's particularly interested in funding applications in health care.

"That should be enough to start about a dozen Amazons or even four Googles," said Doerr, who helped fund both companies in their infancy. "And if we're running out of money we'll run around and look for more."

Apple has forecast that it will sell 10 million iPhones by the end of the year, giving the device roughly 1 percent of the worldwide cell phone market. In January Apple CEO Steve Jobs said the company has sold 4 million iPhones since they went on sale June 29.

The iPhone has claimed 28 percent of the U.S. smart phone market since its release here in June, according to Jobs. But many businesses have shied away because they want the device to work better with their corporate e-mail systems.

To woo more business customers, Apple said Thursday it's tweaking the iPhone to support Microsoft Corp.'s Exchange software, which addresses a key weakness in the gadget and puts it in more direct competition with Research in Motion Ltd.'s BlackBerry and Palm Inc.' Treo smart phones.

Philip Schiller, Apple's senior vice president of worldwide product marketing, said the software update will give iPhones the security and integration of e-mail, calendars and contact lists that businesses have been demanding.

"This is a great, great way to solve all those requests," Schiller said.

One thing noticeably absent from the presentation, however, was support for IBM Corp.'s Lotus Notes e-mail package, another program widely used by businesses. IBM announced in January that it was partnering with Apple to make the software work on iPhones, but there was no mention of the partnership Thursday.

The company's decision to allow developers some access to the closed device represents an about-face of sorts, because developers have been able to build iPhone applications only through the Web and weren't given access to the same software Apple developers use.

In fact, one software update for the iPhone disabled many third-party applications installed on the handsets.

Apple still wants to approve every new application.

Jobs said the approach could become more "liberal" over time but emphasized that Apple's control will ensure the security and reliability of the device.

The company will sell outside developers' iPhone applications through the new App Store. Developers will pay a $99 fee to register and will set the price for their applications. They'll get 70 percent of the revenue and Apple 30 percent, Jobs said.

"This is the best deal going to distribute applications to mobile platforms," Jobs said, predicting that many developers will choose to offer their programs for free to boost their adoption.

The event at Apple's headquarters Thursday included demonstrations by executives from Electronic Arts Inc. and Sega showing off video games the companies have developed for the iPhone, plus applications like a Salesforce.com program for tracking contacts and sales leads and one by Epocrates Inc. to help doctors and other health care professionals find drug information and medical news.

Other companies also are developing iPhone applications. Germany-based business software maker SAP AG says the latest version of its customer relationship management product already works with the iPhone and the BlackBerry.

"(W)e want to make sure that, down the road, if the iPhone becomes a popular mobile device for the enterprise customer, SAP is among the first to support that outcome," the company said in a statement.