AP file photo ** FILE ** In this June 9, 2008 file photo, Apple Inc. CEO Steve Jobs delivers the keynote speech during the Apple Worldwide Developers Conference in San Francisco. Apple Inc.'s iPhone has had a remarkable run over the past year, shaking up the stodgy design of smart phones and securing Apple a small but lucrative slice of the wireless business. To sustain that momentum and keep fickle consumers and Wall Street happy, the company needs a dramatic second act with the next generation of iPhones, which roll out Friday, July 11, 2008, with faster Internet access and lower retail prices. (AP Photo/Eric Risberg, file)

Paul Sakuma / AP To sustain the momentum of the original iPhone's success and keep fickle consumers and Wall Street happy, Apple Inc. needs a dramatic second act with the next generation, which rolls out Friday.

SAN JOSE — Apple Inc.'s iPhone has had a remarkable run over the past year, shaking up the stodgy design of cell phones and securing Apple a lucrative slice of the wireless business.

To sustain that momentum and keep fickle consumers and Wall Street happy, the company needs a dramatic second act with the next generation of iPhones, which rolls out Friday with faster Internet access and lower retail prices.

But even with Apple's untouchable image in the eyes of the Macintosh faithful, there are no guarantees against a letdown for the company or its volatile stock.

After all, Apple has stumbled before in its foray into the cellular business, with a poorly executed price cut two months after the iPhone launch that left many early buyers fuming. And now that it's a significant part of the wireless market, Apple faces some of the same threats as more-established handset makers.

Among those pressures: intensifying competition and the uncertainty of a fractured market with many big players. There's also the risk that even with Apple's reputation, the iPhone might become so widely available that it loses some of the cachet that inspires buyers to wait in lines outside stores.

No one disputes that Apple and Chief Executive Steve Jobs have rattled the cell phone industry with the iPhone's design and features, which are furiously being copied by other handset makers.

However, unlike with the iPod, which became a blockbuster thanks partly to the device's tie-in with the iTunes music service, Apple is wrestling a crowded field of entrenched competitors with the iPhone.

That means Apple must maintain the iPhone's cool factor as rival handset makers race to catch up.

The iPhone is a small part of Apple's business — only 5 percent of its overall sales in the latest quarter. Macintosh computers and iPods typically generate 75 percent of Apple's revenue.

But iPhones are hugely profitable. By some estimates, Apple stands to make between $100 and $400 on each new iPhone sold, depending on the model and wireless carrier.

Investors have put down big bets on Apple's plans, pushing the company's shares up from $120 in March to around $180 today, mostly on anticipation that Apple will blow through its sales projections for the iPhone.

Put another way, though, anything short of a blowout could slam Apple's notoriously volatile stock.

"To keep the stock price up, they'd have to do well, very well, amid high expectations — it's a very tough stock," said Shaw Wu, an analyst with American Technology Research.

In the U.S., subsidies from carrier AT&T Inc. mean that the price for an 8-gigabyte model has been slashed from $599 when the iPhone launched last year to $199 for the new models launching Friday. A 16-gigabyte model is set to cost $299.

Apple will likely make as much money, if not more, on each iPhone as it did with the original models. The difference is that now wireless carriers must pay Apple heavy subsidies to sell the iPhone, and they make up the remainder with higher service charges.

To keep buyers excited, Apple has upgraded the iPhone to work on so-called 3G, or third-generation, wireless networks and improved its support for Microsoft Corp.'s widely used Exchange corporate e-mail program.

Apple is also allowing third-party developers to build applications for the iPhone. It's critical they create relevant programs for corporate America if Apple is to steal a lot of customers from its two biggest phone competitors: Research in Motion Ltd., which makes the BlackBerry, and Palm Inc., which makes the Treo.