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Friday, July 11, 2008, 12:00 pm PT (03:00 pm ET)

Server problems spoil Apple's iPhone 3G launch

Apple Inc.'s iPhone 3G roll-out has quickly shifted from the much ballyhooed consumer electronics launch of the year into a nightmare for both the company and its loyal customers.

Thousands of new iPhone 3G buyers around the world were stuck Friday with iPhones that couldn't function or make calls, as the iTunes servers required to fully activate them experienced a high-tech meltdown and ultimately fell offline.

The issues almost immediately soured the US launch of the much anticipated handset, as the backlog of activations kept thousands of other customers waiting in long lines outside of retail stores much longer than they or Apple had anticipated.

What's more, the problems trickled down to first-generation iPhone owners who were attempting to upgrade their devices with version 2.0 software, also released Friday. Unlike previous updates, the 2.0 release completely wipes all data from first-generation iPhones and deactivates them before performing the upgrade.

After installation, the phones are required to connect to Apple's iTunes servers for reactivation — the same servers that had fallen offline due to requests for new iPhone 3G activations. As such, existing iPhone owners attempting to update their software were also left with phones that were "bricked" and unable to function outside of calling emergency lines.

The issues may be a result of Apple underestimating the number of simultaneous worldwide connections to its iTunes servers during the iPhone 3G launch, a problem that wasn't helped by the simultaneous release of new software updates for existing owners that must also access the same servers.

Unlike last year, when the Cupertino-based company launched its first-generation iPhone exclusively in the U.S. and then later followed up with successive roll outs in a handful of European countries, this year's launch kicked-off in 21 countries over the course of 24 hours.

Attempting to stifle the grey market for iPhones that were being purchased in the U.S., then unlocked and resold overseas at higher prices, Apple also did away with home activation, mandating that each and every new iPhone 3G sold in the U.S. be fully activated before it leaves the store.

Apple has also been experiencing a number of problems getting its new set of "MobileMe" online tools up and running. The $99 per year "push" email and calendar service launched early Thursday morning but was still facing a large number of issues outside of email as of Friday afternoon.