Finally: Apple Unveils iTunes Cell PhoneFinally: Apple Unveils iTunes Cell Phone

Apple Computer Inc. on Wednesday unveiled the long-anticipated Motorola Inc. cellular phone that lets people listen to music purchased through Apple's popular iTunes music store, and the company expanded its successful line of portable music players with the introduction of the iPod Nano.

The ROKR E1, which is available only through Cingular Wireless, can hold as many as 100 songs downloaded from a Windows PC or Apple Mac. The device comes with Apple's desktop iTunes software, which is used to play, purchase and manage music bought from Apple's online music store.

Along with the new phone, Apple also announced the thinnest version yet of its iPod music player. The Nano is 3.5 inches long, 1.6 inches wide, 0.27 of an inch thick and weighs 1.5 ounces. In comparison, the iPod Shuffle, also a smaller version of the iPod, is 3.3 x 0.98 x 0.33, respectively, and weighs 0.78 of an ounce.

The Motorola phone comes with headphones, but also includes speakers. The device lets users play songs at random or select tunes by song, artist or play list. In addition, they can pause a song when making a call, and have it resume automatically after hanging up.

At a Wall Street investors conference held earlier in the day, Ed Zander, chief executive for Schaumburg, Ill.-based, Motorola, said of the iTunes phone, "I think it's going to be big."

While the first version played songs, he expected to eventually add music video playback. However, the rights and royalties to videos remained a hurdle.

Mike McGuire, analyst for Gartner Inc., said the phone was a test of the U.S. market for phones that can also play music, podcasts and other media stored on a computer.

"This is going to be important to test the demand in the U.S. for using a mobile phone for something other than voice calls and text messages," McGuire said.

Motorola is not the first to release a music phone. People in Europe and the United Kingdom, where high-speed wireless networks are more advanced than in the United States, have been able to download music through their carriers. The most advanced phones are available through Samsung, Sony Ericsson, O2 and Orange, according to market researcher Strategy Analytics.

In general, carriers have not pushed manufacturers hard for music handsets, because of the lack of a clear business model, Strategy analyst Chris Ambrosio said. Issues being worked on include digital rights management and developing music products that consumers would be willing buy, since it would be unlikely that they would download a whole album onto a cellular phone. They may, however, pay to get the latest song first from their favorite artist.

Carriers, however, believe there is significant revenue potential from music, given that research shows many people have a strong emotional tie to the songs they like, Ambrosio said.

For at least the next couple of years, however, it's likely consumers who have been collecting large stores of music will prefer to download their songs from their computers to as many devices as possible, McGuire said.

"I don't believe they're looking for another transaction channel," he said.

While carriers won't make money directly from the downloaded music, they may be able to hold on to customers longer by offering the devices, McGuire said.

Cingular, a joint venture between SBC Communications and BellSouth, is selling the ROKR E1 for $249.99, with a two-year cellular phone contract.

The iPod Nano is available in a 500-song model and a 1,000-song model, and pricing starts at $199.