It was touted as the second coming; the next major innovation in mobile phone technology that would revolutionize the way we do all of those time-wasting activities we do. Listening to music, looking at a map, or arguing with your wife on the phone have become oh so simple and fun, thanks to the handy new Apple iPhone.

Unfortunately, every cell phone owner in America did not agree. AT&T — the iPhone’s exclusive carrier — announced disappointing activation data this week. As it turns out, customers only activated 146,000 iPhones during the first weekend of its release. Plenty of Wall Street cheerleaders were expecting activations coming in around 500,000.

Apple stock has tumbled nearly 8% since the news. Now, Apple diehards and some analysts are coming up with plenty of excuses. People had activation problems, so these numbers probably don’t accurately reflect sales, they said. And then there’s that whole problem with the phone getting over-hyped…the stock shot up on great expectations, and is getting grounded now that the actual news is out there.

But what people are forgetting is that the iPhone is not revolutionary. Sure, it looks nice. It’s an interesting novelty, but it’s not going to change anything. It is a fashion accessory for the hip and the wanna-be hip. The network running its web browser is reportedly slow, the touch keyboard is difficult to type with and, at the Apple store, I noticed that the screen becomes completely smudged after heavy use.

It’s not a business phone, so you won’t see many professionals checking their iPhone instead of their Blackberry. And the phone’s biggest potential customers — high school and college students — probably would have trouble digging up $500 for a phone.

But the biggest disclaimer I can attach to this phone is that it is not the most advanced smart phone you can buy…

In countries like Japan, the iPhone is old news. Companies like Nokia have introduced more versatile smart phones like the N95 that have been a hit overseas and amongst the more tech-savvy crowd here in the United States.

It’s time to face facts: Next generation mobile phones are slow in coming to the U.S. They’re much more popular in Europe, Japan and even China. That’s why you should be looking at small, overseas companies that are helping make the smart phone revolution a reality.

Take KongZhong Corp. (KONG: NASDAQ), for instance. Kong is a Chinese company that provides multimedia content to mobile phone users. The company’s ADR has been crushed in 2007 (shares are down nearly 50% since January 1).

However, the company just announced a strategic partnership with Opera to offer its customers a branded KongZhong Opera web browser. And since the KongZhong site will be the default homepage, the company will be able to generate revenue through increased traffic and advertising.

It’s an interesting company in a country with a growing middle class that’s worth adding to your watch list.

Best,
Gunner
July 25, 2007

P.S.: If this kind of unique investment opportunity cries to you as an Earth-shattering chance to make some BIG cash, as it does to me, then you are just the person I need to speak to.

Greg Guenthner

Greg Guenthner uses his experience as a former journalist to dig up the hard-to-find headlines that could lead to big gains for your micro-cap portfolio. Greg offers his readers the scoop on topics ranging from alternative energies to biotechnology, digging up the best penny stock opportunities before they’re discovered by the mainstream media. On top of contributing to Penny Sleuth, Greg also heads Penny Stock Fortunes and Bulletin Board Elite. Special Report: Imagine Getting Rich as Ignored Stocks Soar - You could turn $200 into $1.2 million!

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