iPhone Calling?

Alligators in New York City sewers. Area 51. The Boogeyman. And, of course, the iPhone. Urban legends, all. Or are they? More than a few industry sources now say that Apple (Nasdaq: AAPL  ) is at work on another so-called iPhone, and Motorola (NYSE: MOT  ) doesn't appear to be a partner this time around.

You remember the ROKR, don't you? That was Apple's first try at a phone with iTunes integration. Unfortunately, it had limited appeal. Online digital music maven Playlist.com says part of the problem was slow syncing and (ouch!) a clunky interface.

This time, the speculation says that Apple will introduce two editions of a smartphone that will bear a greater resemblance to Palm's (Nasdaq: PALM  ) Treo or Research In Motion's (Nasdaq: RIMM  ) BlackBerry than it would to the old ROKR.

And it's likely to be made by Apple. Press reports say that component suppliers in Taiwan and Japan are working on separate editions of the iPhone -- one for 3G cellular networks (most common here in the U.S.) and one for GSM networks (most common in Europe). Roughly 12 million of the devices are to be made, and according to reports, a rollout could come as soon as March of next year. Expected features include Wi-Fi, iTunes integration, video playback, and a full keyboard.

So, is any of this real? And, if so, should it be? To the first question, I'd say yes. Apple CEO Steve Jobs wasn't wrong when he decided to make iTunes available on devices other than a Mac or an iPod. But the ROKR was a design bust. A logical next step would be to recast the idea with a more personal Apple touch, potentially drawing from the cultishly popular Newton personal digital assistant.

Besides, Jobs has a history of pulling hardware design in-house to boost demand, beginning with his own attack of the clones upon returning to the Mac maker in 1997. (Apple had agreed to license the Mac OS to several PC makers in the early '90s. Jobs canceled the deals.)

To the second question, I'd say maybe. Here's why: As much as Jobs and his team have proven to be design geniuses, telephony is inherently different. History says that competing successfully in that market requires a degree of specialization that, as far as we know, Apple doesn't yet possess.

Of course, this argument features a huge flaw named Handspring. By creating the Treo, Palm's founders transformed a successful personal digital assistant design into what we now call a smartphone. Today, Palm is an emerging competitor that's just begun to threaten Nokia's (NYSE: NOK  ) dominance overseas and is in the midst of a skunkworks (internal) project to create a new category of mobile device. Palm co-founder and Palm Pilot creator Jeff Hawkins is reportedly leading the effort.

Why mention Palm? Because for years it has supplied the preferred mobile alternative for Mac users. Lately, the firm has been snuggling Redmond just as mobile computing and communications have become more important.

Apple has earned its due with the iPod, of course. But the iconic music player is just that; a player. Others, including Microsoft's (Nasdaq: MSFT  ) Zune, are making a greater effort to embed communications with audio and video. Surely Jobs has noticed and doesn't want to be left out of the next revolution.

For now, the iPhone remains an urban legend. Apple's short history of failure in telephony makes me wonder if it will stay that way. Nevertheless, instant messaging, Wi-Fi, WiMax, and a growing horde of mobile workers suggest there's an ongoing convergence between mobile content and communications. The iPod has yet to capitalize on the trend. An iPhone could change that overnight and, knowing Jobs, probably will.

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Fool contributor Tim Beyers, ranked 1,229 out of 13,985 in Motley Fool CAPS, owns shares of Nokia and a MacBookPro. He'll not be selling either for a while. Get the skinny on everything else Tim is invested in by checking his Fool profile. Palm is a Stock Advisor recommendation, and Microsoft is an Inside Value recommendation. The Motley Fool's disclosure policy is both golden and delicious.


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