During a visit to Las Vegas in December for a rodeo event, Cingular Wireless Chief Executive Officer Stan Sigman received a welcome guest, Steve Jobs. The Apple Inc. chief stopped by to show off the iPhone, a sleek cell phone designed to surf the Web and double as a digital music player.
The phone had been in development by Apple and Cingular for two years and was weeks away from being revealed to the world. And yet
this was the first time Sigman got to see it. For three hours, Jobs played with the device, with its touch-screen that allows users to view contacts, dial numbers and flip through photos with the swipe of a finger. Sigman looked on in awe, according to a person familiar with the meeting.
Cingular and Apple declined to make executives available to comment for this story. Behind the scenes in the making of the iPhone, Apple bucked the rules of the cell phone industry by wresting away control from the normally powerful wireless carriers. These service providers usually hold enormous sway over how phones are developed and marketed – controlling every detail from processing power to the various features that come with the phone.
Not so with Apple and Cingular, which has more than 60 million customers. Only three executives at the carrier, which has become the wireless unit of AT&T Inc., got to see the iPhone before it was announced. Cingular agreed to leave its brand off the body of the phone. Upsetting some Cingular insiders, it also abandoned its usual insistence that phone makers carry its software for Web surfing, ringtones and other services.
In another break with standard practice, the iPhone will have an exclusive retail network. The partners are making it available in
June only through Cingular and Apple stores, as well as both companies’ Web sites.
Jobs once referred to telecom operators as ”orifices” that other companies, including phone makers, must go through to reach
consumers. While meeting with Cingular and other wireless operators he often reminded them of his view, dismissing them as commodities and telling them that they would never understand the Web and entertainment industry the way Apple did.
Jobs flirted with other titans of the wireless industry, but not everyone wanted to play ball. Talks with Verizon Wireless fell
through. Sigman and other top Cingular executives were willing to cede control to Jobs and tolerate his digs at cell phone carriers, all for the privilege of being the exclusive U.S. provider of one of the most highly anticipated consumer electronics devices in years.
Apple eyed the cell phone market as both an opportunity to expand its iPod business and, if ignored, a potential threat to the
company. Cell phones are gradually offering more sophisticated capabilities and features, including increased storage capacity and
In early 2005, Jobs called Sigman to pitch the initial concept of the iPhone. The two executives later met in New York and agreed to pursue the idea. Sigman is a Texan who wears cowboy boots and business suits, while Jobs is a former hippie who sports black turtlenecks and jeans. Despite their vastly different styles, the two executives found common ground. Glenn Lurie, Cingular’s president of national distribution, and Apple’s Eddy Cue, who runs iTunes and had experience on the ROKR project, spoke and exchanged e-mails daily.
Jobs worked closely with Jonathan Ive, the design guru at Apple who was responsible for the look of the iPod and other products, to come up with a head-turning design for the iPhone. Jobs was adamant from the start that the centerpiece should be
a touch-sensitive screen. He deplored the keyboards on portable e-mail devices such as the BlackBerry and Palm’s Treo, because they hogged so much surface area. A large touch-screen, on the other hand, would free up space to view movies and photos.
In July 2006, the Apple and Cingular finalized a deal after 30 hours of negotiations over two days. Plans for the iPhone would have to be kept secret for another six months. In January, Jobs finally unveiled the phone at MacWorld, the conference he has used to launch such key products as the iPod mini. The handful of Cingular people who have access to the sample phones at the company’s headquarters were required to sign confidentiality agreements.
Competitors already are responding. Samsung and LG have announced phones in recent weeks with designs that look similar to the
iPhone. Apple has said it intends to sell 10 million of the devices by 2008, with price tags for two different versions set steeply at $499 and $599.