iPocalypse? Snag Turns iPhones to 'Bricks'

July 11, 2008 — -- Long lines of disgruntled customers wrapped around city blocks across the globe today as Apple scrambled to fix a glitch in iTunes that prevented iPhone acolytes from activating the next-generation phones they had waited hours, even days, to buy.

The problem caused huge delays at Apple stores and other iPhone service providers worldwide, as store personnel wrestled with the issue and word of the problem spread on the Web. In order for an iPhone to be activated, it must be synced up with iTunes.

Robbie Sikander, a 16-year-old New York resident from Afghanistan, waited in line for three hours at the Apple store on Manhattan's 5th Avenue for the chance to buy his phone, but because of delays, it never happened.

"I've been waiting for three hours. AT&T is just not working," Sikander told ABCNews.com as he walked out of the store. "It made me question Apple. ... "I'm going to come back after lunch to try again."

Tanya Lawrence, a 28-year-old woman from Brooklyn, began waiting in line at 7 a.m. on Friday and was inside the store by 9 a.m. The system, however, was down.

"I was so livid. It was so anticlmatic this morning," she said. "The server was down, so in order to activate the phone we had to log on to iTunes, but that was down too. The buzz word this morning was 'just be patient.'"

As Matthew Pimm, 49, waited in line, he wondered why he had come.

"When it was a little hotter out, after I'd been waiting one and half hours in line, I started questioning whether it was worth it to be here," Pimm said.

Silicon Valley tech analyst Rob Enderle called the situation a PR debacle for typically untouchable Apple.

"They're hitting their most loyal customers. People who are waiting in line," Enderle said. "These folks are going to be kind of [mad]."

Enderle says that while it may not totally discourage hard-core users, it could cause a ripple effect in the cell phone market.

"At this point, there are alternative phones out in the market. You slow down people and get them to think about it. [With service] this is an expensive phone," he said. "A lot of these folks can't afford this phone. Maybe this is just enough to keep them from buying it."

Avi Greengart, a tech analyst based in New Jersey, said that consumer reaction will depend on how long outages continue.

"If they get the service back up by the evening news cycle they can say, 'Look. we were unprepared. ... but, all is well now. We apologize for a several-hour delay. It will have no material impact," Greengart said. "If the servers are down for the weekend, they have a severe problem."

Users of the first generation of the iPhone emailed ABCNews.com that they were continuing to have their own issues after updating the phone's software.

"Went to update to the new 2.0 software and was unsuccessful. Now my phone sits in 'Emergency Use Only' mode," wrote Rick Kidd from Glen Allen, Va. "I called my local Apple store for help and could not get an honest answer from them. My phone is rendered useless as we speak and I use it for business. Needless to say, I'm a bit miffed."

Another person emailed the Web site, "tried to update my original iPhone with new iTunes and iPhone software. Phone worked fine this morning. Now it's the most expensive paper weight in my office."

This new generation of the iPhone is getting a full international introduction. While the first version was only sold in six countries, today the new phone is being rolled out in 22 countries.

AT&T, which sells the handset stateside, is continuing to sell the phones to customers, but asking them to complete the syncing process at home.

"There seem to be worldwide issues with this syncing process and Apple is working on it right now," AT&T Wireless spokesman Mark Siegel told ABCNews.com. "What we're telling our customers in the stores is once we have activated their account, we're urging them to go home and try syncing it later on iTunes. ... Apple is working on this problem."

Apple did not respond yet to calls seeking comment.

Since the announcement of the 3G iPhone in June, Apple fanboys (and girls) have buzzed about the smart phone's latest incarnation with its gleaming new features — GPS! Third party apps! — and its shiny new price: $199.

But while Apple's carefully constructed buzz machine is definitely in tip-top shape, the excitement surrounding the new version pales in comparison to last year's release.

"There's no doubt there's going to be less of a circus atmosphere. Last year, Apple was introducing a whole new product category. Unless Apple's going to [introduce] the Apple iJetpack, we're not going to see as much excitement," said Michael Gartenberg, a consumer tech analyst at Jupiter Research. "But that means that the line at the Apple store might only go around the block twice instead of five times."

When the first iPhone went on sale, it retailed for $599. A few months later, that price was cut to $499.

Steve Jobs announced the 3G iPhone early last month at the Apple Worldwide Developer's Conference in San Francisco. The new and improved version offers GPS and new downloadable applications from the online Apple store and operates on a faster network. An 8-gigabyte model retails for $199 and a 16-gigabyte version costs $299.

Those new improvements will be a strong draw for consumers, according to NPD analyst Ross Rubin.

"The improvements on the 3G version are more evolutionary, more incremental. They fill in gaps that were widely recognized in the first product — applications, the speed of the network. These were all limitations," Rubin said. "That said, consumers now have an opportunity to pick up a faster iPhone that preserves the form factor and just about everything consumers liked in the first-generation product ... for half the price."

For Becky Worley, "Good Morning America" technology contributor and YahooTech columnist, that price — combined with a suite of downloadable applications — are what really put the iPhone ahead of the pack.

"Whatever you can dream up of wanting your phone to do, a developer somewhere is going to create it [and] people can purchase or download it for free," Worley said. "This is not some kloogy system that you have to figure out. This is iTunes. I think this is the tipping point."

The iPhone's new applications are especially interesting to Gartenberg as well.

"If you look at the buzz going on right now on Twitter, people are looking at the applications store even though they can't buy anything yet," he said. "There's a lot of excitement and anticipation there. ... It's an Apple event and a lot of people want to be a part of it."

Those people began queuing up in front of Apple stores around the country well in advance of the phone's on-sale date. In New York's Apple store on 5th Avenue, popularly known as "the cube," the line started as early as last week.

New Yorker Daniel Bowman Simon is heading up the line. Not a typical Apple fan, Simon is standing outside of the store in support of "The WHO Farm," a group that wants to get the White House lawn turned into an organic farm.

"I'm number one. ... I got here on Independence Day — July Fourth. We missed the fireworks," he said. "We go to bed around midnight when it quiets down, and we wake up at 5 a.m. when all of the businessmen, women and trucks start coming in."

Last year, New Yorker Greg Packer was first in line at the same store to pick up the iPhone. This week, he stood out front to cheer on his 3G-buying brethren.

"I was here at 5 a.m. on Monday morning last year. The phone was coming out at 6 p.m. that Friday. This was my spot right here," Packer said, pointing to Simon's spot. "People brought me food. I was the first person to buy the phone."

In New York, international tourists swarmed the Apple store to get a better look at the phone.

"I am coming back to the Apple store on July 11 to buy the iPhone in Miami," said Taisa Lopes, a Brazilian high school student visiting the United States with her school. "I am buying it for my dad."

Apple's international push could help bolster the company's sales goals of pushing 10 million units out by the end of 2008.

"Given the way things are going right now, they're definitely on track to meet their goal," Gartenberg said.

Rubin agreed. "Even though there may be less excitement than there was for the first-generation product, there still may be much stronger sales reflected in the new pricing," he said.

But don't expect to see a repeat of last year's string of iPhone copy cats such as the Samsung Instinct, Rubin said. Instead you can expect touchscreen phones with different features so that companies can differentiate themselves from Apple.

"No company has really put together all the components that make the product unique. Any phone right now that has a large touchscreen is being compared to the iPhone," he said. "Manufacturers are going to have to pave a road out of this comparison. ... Ultimately, you don't want to be offering something that's like the iPhone."