Apple's sales still grew, just not as quickly as everybody else's. Apple sold 8.7 million iPhones in the fourth quarter, which is 18% more than in the quarter before. But the overall smartphone market grew 26% in the same period of time, as Motorola Inc. introduced its first devices on Google Inc.'s Android platform and Nokia Oyj boosted its sales by 4.6 million alone.

The last time the iPhone took a dip in market share was in the fourth quarter of 2008, according to ABI Research.

Touchscreen mobile phone adoption in the U.S. grew at a breakneck 159% rate last year, comScore reports, easily outpacing the 63% growth of the broader smartphone market.

By last August, nearly 34 million Americans were carrying smartphones, 23.8 million of them touchscreen devices. And of those touchscreen phones, 32.9% were iPhones.

"The iPhone clearly set the trend in the industry for touchscreen devices, so it's no surprise that it has the largest share of the market," said comScore VP Mark Donovan. "But as other players have entered the touchscreen market with compelling devices, competition is clearly heating up."

Rumors that Apple's iPhone may soon shutter its exclusive deal with AT&T just got some expert support. Gene Munster, a senior analyst for Piper Jaffray, stated in a recent investors report that the company predicts Apple could open its iPhone product to additional U.S. carriers sometime next summer.

In the report, Munster mentioned how Apple gained in market share when it switched from an exclusivity model with French carrier Orange to a multi-carrier model, and that this could propel the decision.

Experts revealed on Thursday that modified SMS messages could result in iPhones being disconnected from the network or hijacked altogether.

Apple said phones incorporating other mobile operating systems, such as Windows Mobile and Google Android, were also potentially vulnerable.

It added that no-one had actually used the flaw to gain access to an iPhone.

The successful debut positions Apple as the dominant player in the market for so-called smart phones, said Shannon Cross, an analyst at Cross Research. Apple is jockeying for customers with Palm Inc. and Research In Motion Ltd., which also showed off Web-equipped phones with upgraded software and more features this month.

"It's a testament for demand out there for the iPhone," Livingston, New Jersey-based Cross, who advises investors to buy Apple shares and doesn’t own any, said in an interview. "Apple is in a position to continue to outpace the competition."

Kaufman Brothers analyst Shaw Wu predicted sales of 600,000 iPhones, while Piper Jaffray & Co. analyst Gene Munster projected 750,000. Apple's previous model, the iPhone 3G, sold a million units in its opening weekend in July last year.

Research in Motion Ltd's BlackBerry Curve moved past Apple Inc's iPhone in the first quarter to become the best-selling consumer smartphone in the U.S., research group NPD said on Monday.

RIM, which already dominates the corporate smartphone market in the United States, also had three of the top five best-selling consumer smartphones in the period, with the Storm at No. 3 and the Pearl at No. 4, NPD said.

T-Mobile's G1 ranked No. 5.

The iPhone was the top-selling consumer smartphone in the U.S. in both the third and fourth quarters of 2008. The Curve was second and the Palm Inc's Centro was third.

• RIM BlackBerry Curve (all 83XX models)
• Apple iPhone 3G (all models)
• RIM BlackBerry Storm
• RIM BlackBerry Pearl (all models, except flip)
• T-Mobile G1

Until now, AT&T has required a two-year contract for iPhone buyers, charging $199 to $299 for the device. The strategy change may be an effort to attract month-to-month customers and clear space on store shelves for new products. Analysts at Piper Jaffray & Co. and Broadpoint AmTech Inc. expect new iPhone models to arrive in the next few months.

Apple may introduce a cheaper version of the iPhone this summer for $99, along with a higher-end version with twice the storage currently available, Broadpoint analyst Brian Marshall said this week in a note to clients.

IPhone customers are required to spend $30 a month on a data plan, giving them access to Web features. That's on top of a voice plan, which starts at $39.99 a month. IPhone customers who sign up without a monthly contact will be required to pay the same amount, Siegel said.

Demand for Apple's laptop computers, in particular, had remained relatively solid for months despite the economic downturn as consumers were willing to pay higher prices for a sleek design and unique operating system. But NPD analyst Stephen Baker said consumers are becoming more price-sensitive as the economic climate continues to worsen.

"Casual buyers or people who are trying to make a choice are trading down," Mr. Baker said.

NPD compiles estimates of sales through U.S. retailers, including Apple's company-owned stores and Web site. The firm estimates that the dollar value of Apple's sales through U.S. retail channels fell 11% during the month, faster than the decline in unit sales. Its market share, measured in dollars, declined to 13.7% from 16.4% in January 2008, NPD said.

1. Keyboard

As proficient as we've become with the iPhone's virtual keypad, tapping touchscreen keys (especially ones without haptic feedback) has its limits. Physical keyboards, like those on BlackBerrys and Treos, are much easier to use. The G1's little keyboard will become especially important as smartphone manufacturers increasingly market their devices as pocket-based PCs, and may give the G1 a clear edge when it comes to gaming.

2. Expandable and Removable Parts

The iPhone's sealed battery is more of a metaphoric problem than a functional one. Sure, it's a pain not being able to swap in a new battery for long jaunts off the grid (thankfully, plenty of accessories are designed to fix this problem), and nobody likes having to ship his phone back to Apple if his battery begins to lose its charge. But this problem has drawn as much fire as it has because it is symbolic of the closed, unmodifiable nature of Apple products—a criticism to which Android seems a direct response. Not only can you swap the G1's battery for a fresh one at will (a feature it shares with virtually every other phone on the market), but you can also add extra memory for songs and programs using its micro-SD slot. Good thing too, since the phone's built-in memory is pretty paltry (more on that below.)