iPhone Shift Scuffs AT&T, Apple Shares

Updated from 3:15 p.m. EDT

The iPhone buzz is wearing off.

AT&T (T Quote) shares slipped Wednesday after Apple (AAPL Quote) made two moves that took a little more sparkle off this summer's heavily hyped smartphone debut.

First, Apple rolled out a competing device. This one is called the iPod Touch -- a touchscreen iPod that essentially strips the cell-phone chip out of the iPhone. CEO Steve Jobs unveiled the new device as the company debuted an entire new lineup of iPods.

The iPod Touch gives gadget lovers a device that's nearly identical to the iPhone, including popular WiFi features. One thing the iPod Touch doesn't have, though, is a requirement that users sign up for two years of cellular service with AT&T.

"For people that didn't want to be locked into a long contract, this is a great alternative," says one money manager who is long Apple and has no AT&T position.

Then, in an unexpected move, Apple killed the 4-gigabit iPhone and slashed the price of the 8-gigabit iPhone by $200, to $399. Apple rarely cuts prices on products, preferring to introduce replacements and discontinue previous models.

The move will add more evidence to the speculation that the iPhone, while causing quite a buzz, may not be selling as rapidly as some optimists had expected.

AT&T shares finished lower by 55 cents, or 1.37%, at $39.73. Apple closed lower by $7.40, or 5.13%, to $136.76.