Apple Inc had sold 1.7 million units of the iPhone 4 worldwide by Saturday, June 26, its most successful product launch yet, the company said on Monday.

Sales of the touchscreen smartphone, which competes with devices from Nokia, Research In Motion and Motorola, surpassed some analysts' expectations, as well as those of Apple itself, which has been having trouble keeping up with demand.

In a statement, Chief Executive Steve Jobs apologized to customers who were turned away because the company did not have enough supplies of the iPhone 4.

Shares of AT&T Inc, the exclusive U.S. provider for the iPhone, rose as much as 1.5 percent after the news as analysts said it meant more customers than expected committed to use the No. 2 U.S. mobile provider's service for another two years.

This is seen as more crucial than ever because AT&T is widely predicted to give up its exclusive rights to the phone in the next year, when Apple is expected to add Verizon Wireless, the biggest U.S. mobile operator, as a service provider.

BTIG analyst Walter Piecyk estimated that about 500,000 of the iPhone 4 sales were to AT&T users.

This could be the last exclusive iPhone AT&T gets so it's therefore the most important one ... It certainly was a huge success for AT&T, Piecyk said. He noted that some investors were not celebrating yet as they ultimately expect AT&T to lose a lot of customers when Verizon starts selling iPhones.

The iPhone 4, which boasts video chat and a longer battery life, launched last week with fans lining up outside stores overnight by the hundreds.

The device appeared to be sold out in the majority of Apple stores in the United States the day after it went on sale.

Hudson Square Research analyst Daniel Ernst said the 1.7 million number likely included preorders, which began on June 15. It was higher than his estimate.

No single smartphone model has been this successful, he said.

BMO Capital Markets analyst Keith Bachman said the early sales figures suggest total iPhone units of 8.5 million to 9.2 million in the quarter that ended June 26, which is above his forecast.

For the current quarter, Bachman estimated iPhone sales of 10.2 million units, rising to 12.2 million for the December quarter.

THE IPHONE COST

The iPhone has transformed Apple into one of the world's leading mobile phone companies, boosting its margins in the process. The company has sold more than 50 million iPhones since the device debuted in 2007.

ISuppli on Monday issued its closely watched bill of materials analysis for the new iPhone. The research group estimated that the device's components cost $187.51.

iSuppli's materials estimate for the previous generation iPhone was $170.80.

The most expensive component in the new iPhone is the display at $28.50, according to the analysis. The part is believed to be supplied by LG Display.

The BOM (bill of materials) of the fourth-generation model closely aligns with those of previous iPhones, iSuppli analyst Kevin Keller wrote in a release.

With the iPhone maintaining its existing pricing, Apple will be able to maintain the prodigious margins that have allowed it to build up a colossal cash reserve.

Apple started selling the new iPhone online on June 15, when both Apple and AT&T websites faltered amid heavy demand, causing delays to many customer orders.

Verizon Wireless, a venture of Verizon Communications Inc and Vodafone Group Plc, is countering iPhone by heavily promoting phones based on Android software from Google Inc.

Apple's shares rose $1.60 to close at $268.30 on the Nasdaq. AT&T shares rose 16 cents to $24.95 on the New York Stock Exchange.

(Reporting by Sinead Carew; editing by Gerald E. McCormick, Derek Caney and Matthew Lewis)

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