Sept. 10 (Bloomberg) -- Apple Inc. sold its millionth iPhone less than three months after the device's debut, allaying investor concerns that demand had slowed.

The company, which had set out to sell a million iPhones by the end of this month, last week cut the price of the handset, which doubles as an iPod music player, by a third to $399. It took almost two years for Apple to sell 1 million iPods, Chief Executive Officer Steven Jobs said in a statement today.

``As far as dispelling the fears that the iPhone was off to a bad start, this should help that,'' said Gene Munster, an analyst at Piper Jaffray & Co. in Minneapolis. Today's announcement shows the price cut was ``strategic,'' he said. ``It's not anything wrong with the phone.''

Apple fell more than 5 percent in Nasdaq Stock Market trading after the Sept. 5 price cut, which analysts said suggested orders had stalled. Jobs said last week that the discount would boost sales in this winter's holiday season. He's counting on the phone to be Apple's third main business alongside Macintosh computers and iPods.

Apple, based in Cupertino, California, jumped $4.94, or 3.8 percent, to $136.71 at 4 p.m. New York time on the Nasdaq. The shares have risen 61 percent this year.

The company may sell more than 1.1 million iPhones by Sept. 30, the end of its fourth quarter, said Munster, who rates the shares ``outperform.''

Jobs's Apology

Jobs said last week that he would give a $100 store credit to customers who paid $599 for the iPhone when it came out June 29. Customers sent hundreds of e-mails complaining about the price cut so soon after the device's debut, he said.

``We apologize for disappointing some of you,'' he said. ``We have the chance to `go for it' this holiday season. IPhone is so far ahead of the competition, and now it will be affordable by even more customers.''

Demand for the iPhone has increased since the price cut, UBS AG analyst Benjamin Reitzes said today in a research note. The handset, along with new computers and iPods, should boost Apple's revenue growth in the next fiscal year, said the New York-based analyst, who rates the shares ``buy.''

Apple says it expects to sell 10 million iPhones in 2008 to take a 1 percent share of the mobile-phone market and lure customers away from Research In Motion Ltd., Motorola Inc. and Palm Inc.

AT&T Inc., the only authorized U.S. wireless-service provider for the iPhone, rose 5 cents to $38.78 on the New York Stock Exchange.

To contact the reporter on this story: Crayton Harrison in Dallas at tharrison5@bloomberg.net.

Last Updated: September 10, 2007 16:05 EDT