Reuters | Apple Inc’s next-generation iPhone, which CEO Steve Jobs is widely expected to unveil Monday, will have to really set new standards in multimedia content and function to wow Wall Street and consumers.

Competition from a host of well-received smartphones based on Google Inc’s Android operating system is also growing, pressuring Apple to raise the bar even higher. The “iPhone 4.0 will keep them ahead of the game. Is it as easy as last year to stay ahead? No. I think Android has made huge progress,” said Gartner analyst Carolina Milanesi.

Apple’s challenge may be to dream up game-changing innovations, since
the iPhone is already an unqualified blockbuster that is the company’s
main profit growth driver, and its share price hovers near record
highs. The bid is made tougher with the early success of the iPad
tablet computer, which many say has already created a new market.

Only last year, Research in Motion Ltd was seen as Apple’s top rival.
While the company’s Blackberry remains the smartphone of choice for
many corporations, Apple has made strides in that market as security
concerns addressed by the Blackberry have eased.

More than 70 percent of Fortune 100 companies have deployed or piloted the iPhone, according to Apple.

But the iPhone’s prime target — for now — remains the consumer, in a
market where it increasingly goes head-to-head with Android phones from
vendors like HTC, Motorola Inc and Samsung Electronics.

Longer-term, investors are squarely focused on the iPhone’s spread into
international markets including China, Apple’s pricing strategy, and
when the device will be available through another U.S. carrier besides
AT&T.

Jobs takes the stage at Apple’s developers conference in San Francisco
Monday following a hectic public schedule of late, where Wall Street is
expecting to get its first formal look at the fourth-generation iPhone.

The phone will likely be faster, have more capacity, a better screen
and battery life, and a front-facing camera — all nice additions, but
none of which move the competitive needle very much.

“There will be some pretty cool things on stage with Steve, but at the
end of the day we know the general functionality,” said Broadpoint
AmTech analyst Brian Marshall.

Some features that iPhone users have long clamored for, such as multi-tasking, will also be added.

GROWING COMPETITION

The iPhone, introduced in 2007, arguably created the modern smartphone
industry. The template pioneered by the iPhone — a roughly 4-inch slab
with a touchscreen interface offering quick access to thousands of
applications — has become the standard for Web-surfing handsets.

But the market has since grown thick with competitors, particularly slick smartphones based on Android.

“Android is the only real contender to the throne,” said Rodman & Renshaw analyst Ashok Kumar.

“Nokia’s position continues to fade, RIM has yet to make traction on
the consumer side, and Microsoft could end up being too little, too
late.”

Nokia’s Symbian mobile operating system is the global market leader and
RIM’s platform is No. 2, but both are losing market share, according to
Gartner data.

The iPhone’s global share surged to more than 15 percent in the first
quarter, making it No. 3. Android was No. 4 with close to 10 percent of
the market, a huge increase from the previous year and gaining, Gartner
data show.

Milanesi said the iPhone has done well internationally, particularly in
Europe, but still has plenty of room to grow in Asia, where competition
is fierce and smartphone preferences can vary widely from market to
market.

The iPhone is available in around 90 countries and on more than 150
carriers. Apple sold a record 8.75 million iPhones in its latest
quarter. That accounted for 40 percent of revenue, with margins
estimated at roughly 60 percent.

Many on Wall Street expect the iPhone to arrive at Verizon no later
than 2011, and perhaps as early as this fall. Apple is not expected to
announce a Verizon iPhone Monday.

AT&T has come under withering criticism from iPhone users over its
network quality, although Jobs said this week he expects to see
improvement this summer.

AT&T said Wednesday it will stop offering an unlimited pricing plan
for new subscribers to its mobile data services, which could help
improve the speed of its network in some areas by cutting down on
network-clogging downloads.

Piper Jaffray analyst Christopher Larsen said the timing of that
announcement, days before Apple’s event, was no coincidence. It could
help the carrier keep its exclusive iPhone deal for longer.

How Apple chooses to price its newest iPhone, as well as the older
models, will be closely watched, given Apple’s enviable margin profile.
The latest model iPhone, the 3GS, starts at $199 with an AT&T
subsidy, with the older model 3G priced at $99.

Many doubt there will be any surprise announcements on Monday, but with
Apple one never knows. The rumors include a Web-based version of
iTunes, and a new version of Apple TV.