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The BlackBerry smartphone better watch its back. A faster, cheaper - and maybe even smarter - phone is within weeks of hitting the market. Rival Apple Inc. has finally launched its long awaited next-generation iPhone, which will be compatible with 3G networks and priced from $199 (8 gigabyte model), half of the first generation’s current price. The new corporate-friendly version, due out July 11, will also provide a faster Internet connection and compatibility with Microsoft Outlook, the popular corporate e-mail system.

Calyon Securities analyst Charles Park said Apple’s aggressive pricing strategy should be viewed, in general, as “negative” for handset vendors like Research In Motion, maker of the BlackBerry, as he expects competition in the smartphone segment to increase. “Although Research In Motion remains the definitive leader in the business segment with the largest amount of U.S. market share and close competition with Windows Mobile worldwide, the Canadian company could experience a deceleration of its growth going onwards,” Park said in a client note.

At Deutsche Bank, analyst Chris Whitmore said the iPhone 3G, which features built-in GPS, faster speeds and enhanced battery life, could create a potential threat to Apple’s own iPod music player. “The lower price point will likely impact iPod unit sales, perhaps increasing cannibalization of the iPod touch, a trade-off Apple is more than willing to make due to the subsidies associated with the iPhone and dramatically expanded reach/global distribution.”

In addition to unveiling its next generation iPhone, the Cupertino, Calif.-based maker of computers and electronics announced on Monday changes in its iPhone business model. Specifically, Apple said it will no longer receive follow-on revenue generating payments from carriers for the iPhone 3G beyond the purchase of the phone by carriers or a commission on sales of the phone by Apple.

Goldman Sachs analyst David Bailey said that while there is a lack of clarity around the changes in Apple’s iPhone business model, once “the smoke clears” he expects the iPhone 3G to be more competitive. “[T]he changes in Apple’s iPhone business model will in some ways overshadow the 3G iPhone product announcement and will undoubtedly increase the volatility in the shares near term. That said, we expect the move from a revenue-sharing payment model to a subsidy model with the carries to be essentially revenue neutral to Apple, while the lower price points will drive incremental iPhone units.”

Several other analysts responded to the news by raising their iPhone sales estimates. Lehman Brothers analyst Ben Reitzes now expects fiscal 2008 iPhone unit sales of 23 million, up from his previous projection of 14.8 million. Merrill Lynch analyst Jeff Fidacaro lifted his iPhone unit estimates to 22 million from 20 million in fiscal 2009 and to 34 million from 30 million in fiscal 2010. At Citigroup, Richard Gardner boosted his calendar-year 2009 unit estimate to 23 million from 26 million and his calendar-year 2010 unit estimate to 28 million from 20 million.

The use of the word “green” in reference to Apple’s iPod may soon carry another designation besides that of body color, according to a recent MacRumors.com report, which uncovered a patent filed by employees of the computer giant seeking approval for a technology that would enable solar cells to be inserted beneath a touch-sensitive screen like those in the company’s iPhone and iPod.

The patent could be the next arrow in Apple’s quiver in its bid for the top spot among smart phones and mp3 players. The company’s iPhone, which is no stranger to complaints about its battery life, ranked 15th in CNet’s quick guide to talk-time battery life, and the solar cell application is a sign that Apple is ready to attack the few complaints surrounding its smartphone all-star.

If the patent application is successful, according to a report in the Times Online (U.K.), it has the potential to “dramatically” increase the battery life of iPhones and iPods. This is important, as the article notes, because once a faster, third-generation version of the iPhone is released, “the device will become even more power-hungry.”

But headlines and hype are nothing new for the 3G iPhone, which Bernstein Research said is widely anticipated to debut around June 9 at Apple’s worldwide developers conference. The firm said that based on recent carrier announcements, Apple will introduce the 3G iPhone into at least 50 additional countries, some of which will feature more than one carrier.

Data from U.S. customs records show Apple is also readying a big product roll-out in early June, according to ImportGenius.

Yet, before Apple investors go running into the street to perform cartwheels, Bernstein cautioned that a surge in iPhone adoption is unlikely to “substantially” boost the company’s earnings in fiscal 2009, citing Apple’s subscription accounting. “For earnings-per-share to jump 50 cents, we estimate Apple will need to sell roughly 27 million phones in fiscal 2009, which would represent penetration of nearly 4% in all countries outside the U.S., which we think is aggressive,” Bernstein said.

Instead, the firm estimates fiscal 2009 iPhone sales of 15 million to 20 million units, generating roughly 20 cents per share in earnings for the Cupertino, Calif.-based company, based on expected lower average carrier payments because of Apple’s transition to multiple carriers in the same country.

In the past two months, the market took a hearty bite out of Apple. At $124, shares are down 37% year-to-date, leaving investors to feel picked over by the typically ascendant stock. JPMorgan analyst Bill Shope sought to allay some of the ambiguity by looking at best- and worst-case scenarios for Apple’s core products.

“All possibilities should be on the table in this time of economic uncertainty,” Shope said, identifying the company’s Mac business as most significant in gauging where the stock will bottom-out.

“[It's] the key swing factor for the stock at current levels, since we believe the performance of this business in an economic downturn will largely determine whether the stock has already bottomed or if there is still further downside,” Shope said.

Fortunately for Apple, Wall Street is optimistic, and Shope thinks the rosy view is warranted - even in the case of a recession - although historically, the computer and software company hasn’t fared well in an economic downturn.

“Several secular changes in the business model that make the business more resilient in its current form.” These include the broader Mac OS X operating system, the move to an Intel platform and virtualization programs enabling Windows applications on the Mac.

Additionally, the iPod’s popularity has widened Apple’s appeal among consumers.

Regarding Apple’s iPod and iPhone business segments, Shope said investors are now more realistic in their expectations.

“Fortunately, we believe sentiment for both iPods and iPhones has already begun to tread into pessimistic territory, representing a dramatic departure from the frothy consensus that dominated this story just two months ago,” he said.

Shope thinks near-term iPod sales may be affected by saturation and a consumer spending slowdown. Giddy tech investors are coming down from their iPhone highs as a result of the market downturn and scaled-back production.

Shope’s base case scenario for the Cupertino, Calif.-based company calls for sales growth of 26% in 2008 and 12% in 2009. Viewing the glass half-full, Shope sees the stock hitting $168; worst-casing it, the stock could fall to $87.

“The base case scenario implies we are currently at fair value,” he said.

A study of the top 25 holdings of the largest hedge funds shows that the investors pared their Microsoft Corp. holdings by about 30% during the quarter, according to Thomson Financial Proprietary Research. The funds also cut back positions in WellPoint, Google Inc., and ConocoPhillips during the quarter.

During the preceding third quarter, top hedge funds had increased their Microsoft positions by 19%, according to the study. There is one less Microsoft holder in the top 30, suggesting an elimination of the position during the fourth-quarter, the market analysis firm added. A much deeper decrease in Microsoft holdings during the fourth quarter compared with the third-quarter increase could imply that more managers will use future stock strength to exit positions in the software giant, Thomson said.

Hedge funds also cut back during the fourth quarter on shares of Wellpoint, reduced another 26% following a 9% decrease in the third quarter. Google positions were trimmed by 15% after an 18% decrease in the previous quarter, and ConocoPhillips holdings were cut by 15% after a 38% reduction in the third quarter.

The five new positions in the top 25 added during the fourth quarter were Apple Inc., in 8th place and held by 19 hedge funds — the most-held stock on the list; General Electric Co., which ranks 18th and is currently trading at about 14 times next years earnings, the lowest in a decade; MasterCard Inc., ranking 22nd; Travelers Cos., in 23rd place, and Fidelity National Information Systems in 25th.

Hedge fund managers slashed Research in Motion positions by 50% in the third quarter, but the study said funds appear to be adding the stock to portfolios again as holdings increased nearly 8% in the fourth quarter.

Funds continue to build positions in railroads, suggesting that they are an attractive longer-term investments, Thomson Financial said, noting that Burlington Northern Santa Fe ranked 15th among top holdings, an increase from last quarter’s rank of 23rd.

Money also moved into Mexico’s wireless company America Movil, AT&T Inc. and Exxon Mobil Corp, which rose 12 notches to 9th largest holding. “This may suggest that the smartest money believes [Exxon Mobil] to be the top energy sector holding to own longer-term,” Thomson said.