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Apple's iPhone: The Must Have Item of 2007?

Shares of Applehit an all-time high today, and they’re rising rapidly, up 13% in less than 48 hours. This all comes on the heels of CEO Steve Jobs’ decision to lift the veil on Apple’s hotly anticipated iPhone yesterday at MacWorld in San Francisco. But can lightning really strike twice? On today’s "Power Lunch," CNBC's Bill Griffeth took an in-depth look at a new debate that’s emerging: will the iPhone be as much of a "must-have" as Apple’s iPod?

If you believe Steve Jobs (and apparently many investors do) - it will! The new handheld device will play music, show movies, display photos, deliver e-mail and, lest we forget, make phone calls. (Forget carrying a BlackBerry, cell phone, MP3 Player and more - the iPhone will do it all!)

“This is the most anticipated telephone in history since Alexander Graham Bell” said Jupiter Analyst Michael Gartenberg. “Apple managed to not only meet the hype that preceded this announcement, they really knocked it out of the ball park”.

Apparently investors feel the same way. The product introduction is fueling the rapid rise in Apple’s stock price. And that’s despite the iPhone’s relatively high price. “They’re going to sell at $499 and $599 initially,” explained Gartenberg. But Wall Street doesn’t see that price point slowing sales. “This is going to be the must-have item of 2007,” he added.

Of course there are investors who see the iPhone as more hype than anything else. “I think it’s time that somebody poured a little water into the Kool-Aid, said CNBC columnist and iPhone skeptic, Herb Greenberg. “And just remind people that we haven’t even seen how the product works. “

“We can all talk about how cool it looks... but the real question is how will it really work? Greenberg raised many other questions including, “Will we really want to use this thing? Is the battery life in the sealed container really going to give us what we need from our phone?”

Michael Gartenberg couldn’t be dissuaded, “I had the chance to spend a little time with this product yesterday and I’ll tell you, it’s a very, very different experience-it leaps out at you.”

So--wlll Samsung and other competitors just stare at the clouds and allow Apple to dominate an already crowded cell phone market? “They (Apple) entered late to the MP3 player market as well,” reminded Michael Gartenberg. “That was a pretty saturated market as well and if you remember in 2001 people said hey Apple is late to the game. It’s just another MP3 player. Turned out to be different.”

Herb Gartenberg conceded that “One of the things that’s different is that they (Apple) made it easy to understand. They took that MP3 name away, and they actually had the name of a product. I think that did a lot to get us away from our Walkmen.

These arguments seem to suggest the jump in Apple share price is right on the money. But Herb Greenberg begs to differ. “We’re talking about a stock price. What is the company worth? And as the price (of the I-Phone) comes down, there still will be plenty of competition. How much money are they going to make on the product. That’s what an investor has to ask."

We'll have to wait and see. The iPhone hits stores this June.

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  • Sue Herera is a founding member of CNBC, helping to launch the network in 1989. She is co-anchor of "Power Lunch."

  • "Power Lunch" & “Nightly Business Report” Co-Anchor

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