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Apple unveils smartwatch, mobile payment system in biggest expansion since death of Steve Jobs

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CUPERTINO, California — Apple unveiled its long-anticipated smartwatch Tuesday, introducing a device that transplants the features of an iPhone onto a smaller screen that's never more than an arm's length away.

Dubbed the Apple Watch, the gadget marks the technology trend-setter's attempt to usher in an era of wearable computing and lift its sales with another revolutionary product.

The watch's debut also heralds a turning point in Tim Cook's three-year reign as Apple CEO. Although the company has thrived under Cook's leadership, it had only released upgrades to the iPhone, iPad and other products hatched before his predecessor, Steve Jobs, died in October 2011. The lack of totally new devices raised questions about whether Apple had run out of ideas without the visionary Jobs.

Now Apple is betting on a gadget that seems like something James Bond might wear. The Apple Watch's top-of-the-line edition comes in a casing made of 18-karat gold, with an array of elegant bands available for most models. The watch can serve as a walkie-talkie, a drawing pad, pulse monitor, calorie counter and activity tracker.

"It is amazing what you can do from your wrist," Cook said.

Apple is a late arrival to the still-nascent market for wearable technology. Several other companies already sell smartwatches that have been greeted with widespread indifference.

But Apple has a reputation for igniting dormant markets. Other music players, smartphones and tablet computers were first to market, but the devices did not enthrall consumers until Apple imbued them with its magic touch.

The smartwatch "might not only be a game changer for Apple, but for the entire industry," says FBR Capital Markets analyst Daniel Ives. "A lot of major technology players around the globe are taking notes on what Apple is trying to do here."

Investors appeared lukewarm about the unveiling. Apple's stock dipped 37 cents to close at $97.99, but the shares had been surging for months ahead of Tuesday's show. The stock has gained 22 percent so far this year and hit an all-time high earlier this month.

It will take months to gauge the popularity of the Apple Watch. The $349 device won't go on sale until early next year.

Cook hailed it as the most "personal device we have ever created."

The watch is "the first product we have seen with Tim's fingerprints all over it," said Creative Strategies analyst Tim Bajarin, who has been following Apple through most of its 38-year history.

The watch will tie into a new payment system designed to enable people to store all their credit card information in a digital locker so merchandise can be bought with a tap on a sensor at a checkout stand or a press of the button.

The watch must be used with one of the iPhone models released in the past two years — the 5, 5S, 5C or the latest versions scheduled to go on sale Sept. 19 in the U.S. and nine other countries.

Here's a closer look at what Apple has in store:


LARGER iPHONES

The iPhone 6 will feature a 4.7-inch screen, up from the 4-inch screen on the models released in each of the previous two years. The iPhone 6 Plus will have a 5.5-inch screen and other improvements, including longer battery life, that will cost an additional $100.

App developers will have new tools to rearrange their content to take advantage of that larger screen.

PHOTO: Apple CEO Tim Cook discusses the new iPhone 6 and iPhone 6 plus on Tuesday, Sept. 9, 2014, in Cupertino, Calif. The iPhone 6 will have a screen measuring 4.7 inches, while the iPhone 6 Plus will be 5.5 inches. (AP Photo/Marcio Jose Sanchez)
Apple CEO Tim Cook discusses the new iPhone 6 and iPhone 6 plus on Tuesday, Sept. 9, 2014, in Cupertino, Calif. The iPhone 6 will have a screen measuring 4.7 inches, while the iPhone 6 Plus will be 5.5 inches. (AP Photo/Marcio Jose Sanchez)

The new phones are not as big as Samsung's latest flagship phones — 5.1 inches for the Galaxy S5 and 5.7 inches for the Note 4 — but they will be large enough to neutralize a key advantage Samsung and other Android manufacturers have had.

The iPhone 6 will also have a barometer to estimate how much users climb stairs, not just how far they walk or run.

Apple is improving a slow-motion video feature by allowing even slower shots on the iPhone 6. The camera will be able to take 240 frames per second, double the rate of last year's iPhone 5s. Normally, video is at 60 frames per second.

Starting prices for the new iPhones will be comparable to those in the past — $199 with a two-year contract for the iPhone 6 with 16 gigabytes of storage.

However, the step-up models will have double the memory as before — $299 for 64 gigabytes and $399 for 128 gigabytes. The iPhone 6 Plus phones will cost $100 more at each configuration.


MOBILE PAYMENTS

Apple is calling its new payment system Apple Pay.

Consumers will be able to use their phone cameras to capture a photo of their cards. Apple will verify it behind the scenes and add it to the phone's Passbook account so people can make payments at a retailer. Apple announced several merchants that will accept this system, including Macy's, Whole Foods, Walgreens and Disney stores. American Express, Visa and MasterCard all are cooperating with Apple, too, as well as most major banks.

For security, the card number is stored only on the device. Each time you pay, a one-time card number is created to make the transaction.


SMARTWATCH

Cook says Apple had to invent a new interface for the watch because simply shrinking a phone would not work. Much of the interaction will be through the dial on the watch, which Apple calls the digital crown. It's used to zoom in and out of a map, for instance.

Apple worked with app developers to create new functionality. Users will be able to unlock room doors at some Starwood hotels or remind themselves where they parked with a BMW app.

The new watch will come in a variety of styles, with a choice of two sizes.


NEW SOFTWARE

Though much of the attention has been on new gadgets, the software powering those gadgets is getting its annual refresh. Apple considers iOS 8 to be its biggest update since the introduction of the app store in 2008.

Existing iPhone and iPad users will be eligible for the free upgrade, too.

Among other things, iOS 8 will let devices work better in sync. For instance, it will be possible to start a message on an iPhone and finish it on an iPad. With an upcoming Mac upgrade called Yosemite, it will be possible to continue working on that same message on a Mac computer. These handoff features will extend to the Apple Watch.

The new software will be available to existing users on Sept. 17.

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Video:
PHOTO: For the first time in years, Apple's iPhones weren't the star of the show. Apple has unveiled a smartwatch, a wearable device that marks the company's first major entry in a new product category since the iPad's debut in 2010. (Sept. 9)
For the first time in years, Apple's iPhones weren't the star of the show. Apple has unveiled a smartwatch, a wearable device that marks the company's first major entry in a new product category since the iPad's debut in 2010. (Sept. 9) PHOTO: Forget about the iPhone 6 and the new Apple watch, every iTunes user in the world got a free U2 album Tuesday, as the band performed following CEO Tim Cook's latest product announcements. (Sept. 9)
Forget about the iPhone 6 and the new Apple watch, every iTunes user in the world got a free U2 album Tuesday, as the band performed following CEO Tim Cook's latest product announcements. (Sept. 9)
Photo Gallery:
PHOTO: Apple CEO Tim Cook discusses the new Apple Watch on Tuesday, Sept. 9, 2014, in Cupertino, Calif. (AP Photo/Marcio Jose Sanchez)
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