The iPhone's secret sauce? Software.

July 29, 2007: 4:52 PM ET

It felt nice. An AT&T (T) spokesman let me babysit his iPhone overnight, and I couldn't get over how nice it felt in my hand. Much like the iPod nano it is tightly put together, with just enough weight to feel like a tool, not a toy. Since I only had it for a few hours, I decided to focus my analysis on what Apple's (AAPL) hype-driven gadget does best: Software.

People talk about how Symbian phones have great software, but I don't think those people get the iPhone. The pocket-sized iPhone is a mini-Mac, and its software outclasses any other mobile operating system I've tried.

Why? The most obvious thing is the smooth animation, which makes the icons zoom into view and pop open. It's easy to dismiss this as cartoon-y excess, except that once you use it for a while, you realize that the fluid interface makes you feel as though the device is sensitively responding to your every gesture. That animation, the legacy of Mac OS X, makes the difference between feeling that a device is working against you, and feeling that it's an extension of your brain.

That feeling extends to every aspect of the phone's operation. I found myself holding the phone with my left hand while typing with three fingers from my right hand – and for the most part, it just worked. (I had the occasional typo, but I felt like with practice, I could get pretty good.)

And after I used the phone for a while, it occurred to me that the iPhone is probably the most software-defined device I've ever seen. Pick up a Palm (PALM) Treo, a Research in Motion (RIMM) BlackBerry, even a pocketable PC running Microsoft (MSFT) Windows, and you see a phone with a full QWERTY keyboard, a directional button, and a screen on the front. On an iPhone, there's just a screen and one button.

The rest is pretty much handled by software. Software generates the iPhone's keyboard and its phone keypad. Software turns the pokes and swipes of your finger into commands that launch apps and scroll through songs and websites. I can't think of another device this capable that leans so much on code.

And if the iPhone does take the world by storm, it will be because of that software. None of Apple's competitors in the phone industry – none besides Microsoft, anyway – have a track record of developing world-class operating systems and deploying them on millions of devices. The OSes that we've seen on phones up to this point, including Palm and Symbian, are little competition. Ever seen an animated weather widget on the Symbian OS?

So when it comes down to it, that's what the iPhone is all about – that is its main differentiator. The more Apple can bring the full freedom and flexibility of the Mac to its phone-calling cousin, the harder time competitors will have matching its power.

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