June 19 (Bloomberg) -- Apple Inc. drew crowds to the release of its new iPhone, using the promise of faster speed and more features to keep shoppers from defecting to Research In Motion Ltd. and Palm Inc.

The company opened its 211 U.S. stores at 7 a.m. to sell two models of the iPhone 3G S, which offers a video camera and more memory. Those lining up included new customers and current users, who had also bought the first iPhone in 2007 and the second one that came out last year.

“I worship the Apple God,” said Kevin Meaves, 34, who works at the U.S. Defense Department and lined up outside the Apple store in Arlington, Virginia, with about 100 other people. “I have all of Apple’s products and every time something new, better, faster and different comes out I have to have it.”

The phone will face off against increasingly sophisticated rival products, such as Palm’s new Pre and Research In Motion’s BlackBerry Tour. The Pre, the brainchild of former Apple executive Jonathan Rubinstein, features a touch screen, a slide- out keyboard and the new WebOS operating system.

Apple, based in Cupertino, California, also is aiming to broaden the iPhone’s appeal to cost-conscious shoppers. It’s now selling the 8-gigabyte version of the year-old iPhone 3G for $99, half the original price. That may help push iPhone sales to 18 million units this year and 28 million in 2010, said Mike Abramsky, an analyst with RBC Capital Markets in Toronto.

Tokyo, London, California

More than 100 people lined up outside stores in San Mateo and Palo Alto, California. Crowds were bigger than that in Tokyo and smaller in Toronto, London and San Francisco. In some locations, Apple employees wearing blue and orange shirts passed around water and coffee and applauded as people entered stores. Apple marketing chief Phil Schiller watched customers snap up iPhones at the Palo Alto store, saying he was there “for fun.”

Lines at most stores were shorter than those at the introduction of the iPhone 3G a year ago, when people in cities including New York and Tokyo camped out overnight.

“We are thrilled by the customer response to iPhone 3G S,” said Steve Dowling, an Apple spokesman.

An employee in the Apple store in Palo Alto said phone activations are taking 10 to 15 minutes, compared with 2 to 3 minutes earlier today.

Apple didn’t immediately have a comment on whether customers are experiencing activation delays. Michael Coe, a spokesman for AT&T, declined to comment, referring inquiries to Apple.

Jobs’s Leave

The iPhone 3G S is the first model to be introduced by someone other than Chief Executive Officer Steve Jobs, who took a medical leave in January after a hormone imbalance caused him to lose weight. He is due to return at the end of the month.

Two years have passed since Jobs, 54, released the first version of the iPhone, whose success spurred rivals like Palm and RIM to develop similar touch-screen models. Sunnyvale, California-based Palm began selling the Pre this month, while RIM began selling the BlackBerry Storm last year.

Apple rose $3.60, or 2.7 percent, to $139.48 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have gained 63 percent this year. RIM, in Waterloo, Ontario, fell $3.77 to $72.78. Palm added 87 cents to $13.93.

Preordered Phones

The iPhone 3G S starts at $199 for a model with 16 gigabytes of memory, and a 32-gigabyte version is $299. Piper Jaffray & Co.’s Gene Munster said in a note today that his forecast of 500,000 units sold this weekend will prove to be “conservative.” Crowds in cities including New York, where he estimates 350 stood in line, were larger than he expected.

The iPhone 3G sold about a million units in its July 2008 debut. The latest version will only sell in eight countries today, versus 21 a year ago, the Minneapolis-based analyst said. Apple says it plans to offer the latest iPhone in more than 80 countries.

Apple and AT&T Inc., the exclusive U.S. wireless carrier for the iPhone, let buyers preorder the iPhone 3G S for home delivery or pickup today at stores. Hundreds of thousands of customers preordered the device from AT&T, spokeswoman Jeannie Hornung said today, declining to be more specific.

AT&T also will carry the product in its outlets, as will Best Buy Co. and Wal-Mart Stores Inc.

Apple also released new iPhone operating-system software this week that adds more than 100 new features and works on the 3G S and older models. That software, Abramsky said, could “sustain delight” with Apple’s phone and encourage even more developers to create applications for the device. More than 50,000 applications are available for the iPhone today.

Jacquie Brennan downloaded the new iPhone OS 3.0 software, even though she preordered a 3G S for delivery today, because she wanted immediate access to the new features, including copy and paste. The Houston attorney, 57, said she was drawn to the latest model’s extended battery life and voice controls.

‘Camped Out’

In past years, customers lined up days in advance to be the first buyers of Apple’s latest gadget. This time, lines started forming hours before stores opened. Keith Hobin, 19, was the first and only one outside Apple’s store on Fifth Avenue in New York amid a downpour yesterday afternoon. Hobin, of Montclair, New Jersey, lined up for a friend.

“We camped out for the last iPhone. We thought it would be fun to do it again,” said Hobin, managing editor of TheiLife.com. “It’s also cool that we’re first since no one else decided to go for the challenge.”

By this morning, dozens had joined the line outside the Fifth Avenue store. In Arlington, Sasa Eric, a technology consultant with Deloitte, was the first one to buy the new model. He had lined up at 3 a.m.

‘So Happy’

“I’m so happy right now,” said Eric, 25, smiling as he walked out of the store with Apple representatives clapping for him. He was buying his first iPhone. “I guess you can say I fell into the peer pressure, but this is a pretty cool phone.”

As many as 200 people lined up in front of Softbank Corp.’s flagship store in downtown Tokyo yesterday to reserve their purchases ahead of the product’s June 26 debut in Japan, said Natsuko Kameda, a spokeswoman at Tokyo-based Softbank. She declined to comment on how many people reserved their phones.

In San Francisco’s Marina district, more than 60 people were waiting at 6:30 a.m., including Peter McQueen, 27, a medical student looking to switch to the new iPhone from a Palm handset. At the city’s Union Square location, where Apple had set up a trolley with coffee and bagel bits for those in line, Cesar Medina, 37, was looking to upgrade from an earlier model.

“Once you’ve met the iPhone, you never leave the iPhone,” said Medina, a civil engineer. “I can get rid of my girlfriend, but not my iPhone.”

‘A Religion’

In Toronto, about 20 people were in line 15 minutes before Apple’s store at the Sherway Gardens mall opened. Andy Dinner, a college graduate, was changing from a BlackBerry.

“I’m getting the biggest and the best,” said Dinner, 22. “My girlfriend is superhappy with it. The operating system alone is pretty flawless, it’s so smooth.”

At Apple’s Regent Street store in London, there was no line. Tomasz Nowak, an information-technology project manager from London, said he was considering buying the iPhone because it also has a music player, camera and e-mail. Nowak, 32, also was still considering a BlackBerry or a Nokia Oyj device.

Many current iPhone customers probably will skip this upgrade since they can get most of the same features by downloading the new operating system, said Ken Dulaney, an analyst with Gartner in San Jose, California.

Ken Gengler, a software engineer in Portland, Oregon, said he’s waiting to see how his “classic” 2007 iPhone works with the new software. And Jeffrey Ng, president of New York-based Eastmedia Group Inc., also plans to wait -- after buying the first two versions.

“If my phone dies or it breaks, I will get the iPhone 3G S, but outside of that, I don’t think it’s necessary,” Ng said.

The lack of lines in some cities probably doesn’t reflect customers’ overall attitude toward the latest iPhone, said Gartner’s Dulaney. Most are so smitten with Apple’s brand they will probably buy whatever the company puts out, he said.

“They’ll do very well,” Dulaney said. “This is a religion, and when you get the call, you go.”

To contact the reporter on this story: Connie Guglielmo in San Francisco at cguglielmo1@bloomberg.net

Last Updated: June 19, 2009 16:10 EDT