Steve Jobs on the iPhone: Apple’s next big product

as in new iPhones. But major issues like the options backdating scandal still lurk in the background and CEO Steve Jobs today talked about it exclusively with CNBC. Take a look at the stock it's soared on the new product news the iPhone good enough for a gain of more than eight percent on Apple stock. Apple CEO as I mentioned Steve Jobs spoke to CNBC Silicon Valley Bureau Chief Jim Goldman in the first on CNBC interview at Macworld. Jim. Hey Maria good evening to you indeed these are heady times for Apple computer the company quick to point out today that this is not merely another cell phone but an important new product platform for Apple computer changing industries in much the same way that Macintosh did in 1984 and then iPod in 2001. Now it's iPhone's turn. This is an extremely important product for Apple's future something I asked Steve Jobs about in this first on CNBC interview. First of all you look at handsets. This is probably not only the most vibrant technology sector there is out in the globe. This is also one of the most competitive. Why in the world would Apple computer want to jump into the handset market with so much competition and already so many players. You know one of the biggest motivations for for working so hard for a few years to make a great product is you want one yourself. And we use all the handsets out there. And boy is it frustrating. It's really frustrating.

It's a category that that needs to be reinvented needs to be made not only more powerful but much easier to use. And so we thought we could contribute something. And we don't mind the fact that there's other good companies making products out there. The fact is that there is there is a billion handsets that were sold in 2006. And so if we just got 1 percent market share that's 10 million units. And we think what we've done is to is to reinvent the phone and completely change what your expectations are going to be for what you can carry in your pocket. You mentioned in your keynote you talked about the Mac. You talked about the iPod. And now there's this. What makes this such a product that would enjoy such lofty company. How important is this to Apple computer and why. You know time will tell. The Mac changed the whole computer industry and it really made computers easy to use for the first time and brought graphics into the personal computer for the first time. The iPod changed the way we listen to music and change the whole music industry.

I think the iPhone may really change the whole phone industry and and I think give us something that that's that's vastly more powerful in terms of you know making phone calls and keeping all your contacts on it having the best iPod we've ever made fully integrated into it and having the internet in your pocket with a real browser and real email and you know the best implementation of Google Maps on the planet having all this stuff in your pocket and yet having it be 10 times easier to use. I think this is where the world's going. You mentioned during the speech as well you kept coming back to it too. You kept showing the competitors. You kept showing Palm and RIM and Nokia and Motorola. What message are you sending not only to your immediate competitors but to the entire industry? We're a financial network obviously so from an investor's standpoint I don't know if you've been seeing what your comments have been doing today but you know Research in Motion is getting clobbered and I would imagine the other smartphone manufacturers are also feeling an enormous amount of pressure because you have now officially entered the game.

Well you know we don't really think in those terms. We're a product company. We love great products and so you know in order to to explain what our product is we have to contrast it to what's out there right now and what people use. So you know that's what we do. And looking at this also when you and I talked about the video iPod when that finally I'm sorry the iPod that also does video. You were careful to correct me that last time. You said you know you would never manufactured so many of these things before and we'll see how it goes. We don't know if video is going to be a killer app but we'll see what happens. Yes. What's your underplaying statement today about downplaying the potential and opportunity for this device. Well to go back to our prior conversation we can now say that video worked. It is a killer app. We've sold over 50 million TV show episodes and in four months we've sold 1.3 million feature films off iTunes. So it's definitely working. As far as this goes you know this is the future and and it's not you know it's I wish I wish we could sell it for $100 today. We can't. It's a little more expensive than that. But as we bring the costs down year over year and can appeal to more and more people I don't see why everybody wouldn't want one of these. Last question for you. Again I mentioned we are a financial network and you know the question is coming because you read the the press just as much as I do about you and your stature here at at Apple Computer. There is this ongoing stock options backdating controversy that you're dealing with. What message do you have for shareholders and investors and consumers and employees that this particular controversy is what is going to happen in terms of your tenure

at the company? How is it going to affect you? How do you reassure people that this is not going to taint you? Well you know it's it's a little frustrating sometimes what the press is writing. A lot of these folks just have no idea what they're talking about and it is frustrating to read it. But you know we did our own internal investigation and then we actually got a an independent investigator a former federal prosecutor who's extremely highly regarded and they looked at Jesus the better part of a million documents and they took several months and and they came out with their report that that said what it said and one of the things it said was that no current management had had any misconduct. We did find some things that we that I wish we hadn't found and that I you know I as CEO you know to some extent I'm responsible for but you know we've we've turned that all over to the SEC and and they'll they'll take a look at at at some of those things that we found but I you know I don't think they're going to affect current management and I think everything's going to be just fine. Steve Jobs here to stay.

Well I again I serve at the pleasure of the board and the shareholders and as long as they want me I'd love to keep doing this job. Yeah I think they want you so thanks very much. Okay. Candid and comfortable Steve Jobs no question about it basking in the glow of what promises to be Apple's next big red hot product but again trying to make sure that that glow isn't eclipsed by this ongoing stock options backdating scandal. Maria back to you. Jim thanks very much we continue our discussion now on Steve Jobs and Apple computer. Joining me now with their insight is Richard Stice. He's hardware equity analyst with Stanjan & Poors. Lynn Turner managing director of research at Glass Lewis. Gentlemen nice to have you with us. Thanks for having me. Welcome to the program. Give me a quick reaction to the iPhone and the impact on the stock in 07. Sure well in terms of the the iPhone release I think you look at it and the bar was set very very high for this and it even exceeded our expectations. It looks like truly a revolutionary product. The it's now a touch screen format. The buttons are gone. It's a very large screen.

A lot of new technology and capabilities related to it and in terms of what we're projecting once it actually does come to market in June and in the subsequent 12 month period we think it can add about 25 cents a share on an accretive basis and that's assuming about a 50 percent rate of cannibalization with the standalone iPod device. Now if they're able to get do a little bit better than that and do about 15 million units we think with the additional leverage that they have you can add maybe 70 to 75 cents to the bottom line. So we we think it's definitely a home run product for Apple. Lynn do you agree? Yeah I don't think the stock option scandal is going to impact this. At the end of the day the earnings are going to be there. If Jobs is able to put out a better mousetrap when it comes to the cell phone heck all of us would probably like to have a better cell phone than what we have today and if he's able to accomplish that I think this company will continue to do very well. What about the issue that is present in the market today which is the fact that prices keep coming down this is basically a commodity right the cell phone everybody's competing for the same customer. How does that play into things? Sure well I'll jump in on that and I mean if you look at what they did related to the their Macs actually in FY06 they actually saw ASPs rise modestly so Apple has a certain obviously a coolness factor a particular cachet they have a lot of people that will follow and and purchase the product just because it is an Apple and they've had good experiences in the past be it with the iPod be it with the Mac or another particular product maybe the use of iTunes so you're right it's a commodity related space and certainly prices will erode over time but we think Apple is is going to be able to to forestall that to some extent at least over the near term. Real quick on the stock performance

today an all-time high the shares certainly got a huge boost from this did the market get it right Lynn? Yeah I think they they did I think there's tremendous cachet for Apple amongst the the teens and the 20 to 30 year olds in this country he's got tremendous pull he's got tremendous market recognition and if he again puts out the better mousetrap people are going to follow him. All right we'll leave it there gentlemen nice to have you with us thanks very much. Thanks Maria. We'll talk with you soon. An upcoming clinical trial could make it CV Therapeutics' biotech boomerang of a year. We're live at the JP Morgan Healthcare Conference with the CEO next. You