Apple ( AAPL) covered one possible Achilles heel of its iPhone. The company announced Monday that its engineers have extended the iPhone's ability to sustain active use of its key applications, including making calls, surfing the Web and playing music and videos. Apple initially said most of these functions would endure five hours of active use. Music playing time was estimated at 16 hours. According to today's announcement, the iPhone will have eight hours of active talk time, six hours of Internet use, seven hours of video playback and 24 hours of audio playback. Shares of Apple gained $3.73, or 3.1%, to $124.23 midday Monday. Improving the iPhone's battery life addresses a key weakness that competitors and critics have leveled in the run-up to the device's launch. Apple has touted the pricey iPhone as a multifunctional device that lets users enjoy the best of its iTunes portable music service, view videos on a larger screen and stay connected to the Internet and email when on the go. A short battery life would undermine these claims and diminish buyers' willingness to pay $499 for the base model or $599 for more memory to store music and video files. This is much more expensive than most multimedia phones available in the U.S. today. "From our sources in supply chain, there's been considerable concern with battery life for some time," says Shaw Wu, an equity analyst with American Technology Research. "This definitely appeases the fear that battery life would be a hindrance" to performance, customer satisfaction and, ultimately, sales.
Wu does not hold Apple shares, and his firm does not perform investment banking services for Apple. The news comes about two weeks before the iPhone is scheduled to hit the shelves of Apple stores. The company has reshuffled its engineering resources to make sure the iPhone's June 29 debut would suffer no delays,
especially as the company's stock has risen on growing expectations for device sales. Conservative figures peg iPhone shipments at between 2 million and 5 million this year, and more than 10 million in 2008. Piper Jaffray analyst Gene Munster forecasts 45 million units shipped in 2009. That would dwarf sales of Research In Motion's ( RIMM)BlackBerry, which have just begun topping 1 million new subscriber accounts on a quarterly basis. A shorter battery life would limit the iPhone's utility for business users who have come to rely on the durability of Blackberry, which endures days of active use without recharging. The iPhone in some ways is starting behind the Blackberry because it lacks a feature for immediate email delivery. Apple also decided against including a Blackberry-like keyboard to make its screen as large as possible for surfing the Web and watching videos. Extending the battery life can help the iPhone maintain its appeal as a multimedia device for general consumers, and keep it on target to meet sales forecasts even if business users stay faithful to their BlackBerry.