5 Red Flags for iPhone 4

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NEW YORK (TheStreet) -- Apple's (Stock Quote: AAPL) redesigned iPhone is destined to be a knockout success. The phone scores high on style points with its sleek glass and stainless steel design, and it wins points for its multitasking software and improved screen.

There are, however, a few shortcomings.

The Apple iPhone 4 is set to go on sale Thursday. Judging by the record demand during the pre-sale period, the newest iPhone will make a huge sales splash, especially with old iPhone owners trading up.

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All the presales excitement and Apple-driven hype have set expectations very high. But mighty Apple plays to a tough crowd. It's an affluent group that has been eager to buy the next new thing out of Cupertino, Calif. It's also a highly discerning group with a refined taste in gadgets, and that makes them a bit fussy.

Here are five bruises on the new Apple iPhone that may engender complaint.

No.5: A skimpy camera

As smartphone challengers like HTC, Motorola (Stock Quote: MOT) and Nokia embrace the megapixel race with 8-megapixel and 12-megapixel cameras, Apple's new iPhone keeps it cheap with a 5-megapixel model.

This will be a bigger point of contention this week when Verizon (Stock Quote: VZ) and Motorola unveil the Droid X Wednesday, the newest Google (Stock Quote: GOOG) Android phone, which features an 8-megapixel camera. Android phone giant HTC has also been generous with 8-megapixel cameras in its Droid Incredible and Sprint's EVO.

Meanwhile, Apple, always the laggard in cameras, won't enter the 8-megapixel class until next year when it debuts a sweet Sony camera in its 2011 iPhone. But by then, who knows where the rest of the pack will be?

No. 4: No Swype

If you've seen Swype or used it, you know why this omission makes the list. Typing on a touchscreen is a challenge as the flat glass surface offers few clues to where your fat fingers are precisely making contact. It's an error-prone process that gives one a longing for the raised keys of the BlackBerry keyboard from Research In Motion (Stock Quote: RIMM).

But the Swype keypad software helps tame the new medium. Swype follows the pattern of your finger movements to type words or predict words without the usual hunting and pecking.

Apple did wonders with the touchscreen, but Swype makes it more useful for those among us who like to type.

No.3: Video calling

Okay, it's not totally bait and switch, but Apple's hot new iPhone video calling feature, FaceTime, comes with lots of asterisks and a limited applicability.

Say you want to video chat with someone using the Apple iPhone 4. That someone has to have a WiFi connection and he has to use the same application on his own iPhone 4. You're looking at a small club of people -- not exactly an application of global Skype-like proportions.

No. 2: iPhone 4 shortages

Strong demand is only half the story for Apple's iPhone sales debut. Limited supply is the other. A shortage of in-plane display panels, the crucial part of Apple's touted retina display screens, has forced Apple's contract manufacturers to cut production rates in half to 1 million iPhones a month.

This means there won't be enough iPhones on hand to meet the presumably high demand. Though it's not a terrible problem to have if you are a gadget maker, sellouts and delivery delays will mar Apple's big iPhone 4 debut. The frustration could push buyers toward other phones.

No.1: No Verizon iPhone.

A new iPhone is big. But a new iPhone at Verizon? Much bigger.

Apple's exclusive partnership with AT&T (Stock Quote: T) has been a point of discord among iPhone owners and it has tarnished the public perception of both companies. It also has done almost nothing for AT&T's stock.

Investors have been waiting for the Verizon iPhone. But that's apparently not going to happen until next year, if ever.

So Apple fans who want the new iPhone have to lock in for another two years with AT&T. This scenario is not particularly pleasant considering that AT&T's new subscriber plans put penalties on people (like iPhone users) who happen to be heavy data users.

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