The latest iPhone hit stores on Friday with new features and faster speeds, drawing some fans but not the crowds that had swarmed Apple and AT&T stores at previous iPhone launches.

At an AT&T Inc store near New York's Grand Central Terminal, a handful of people had lined up before 6 a.m. as store employees set up ropes and posts in the event that more consumers arrive later in the day.

I converted from a PC to a Mac about two years ago and I prefer the operating system, and I think this will be a good compatibility to what I've got on my computer, said a woman named Diane who planned to buy an iPhone for herself and her preteen daughter. She declined to give her last name.

I think it's going to make my life a little more efficient and easier, and have everything syncing more seamlessly.

The new iPhone, the 3GS, was unveiled last week at Apple Inc's annual developers' conference. Priced at $199 for a 16-gigabyte model, the smartphone features a faster processor, better battery life and the ability to take videos.

But because many people had already preordered the new phone, which offers a more modest technological leap over the current model, many analysts had predicted the first-day throng to be less than in previous launches.

At Apple's flagship New York store in midtown Manhattan, hundreds of shoppers queued up before the 7 a.m. opening but the line appeared shorter than in years past.

Apple released its first iPhone model two years ago, and it quickly became a consumer phenomenon. The second-generation 3G model was released last summer.

Apple has sold more than 40 million units of the iPhone and iPod Touch, which uses the same software. The touch-screen phone competes with the more business-oriented BlackBerry from Research in Motion Ltd and Palm Inc's new Pre, which has seen solid demand since its release this month.

The latest iPhone went on sale in the U.S. and seven other countries on Friday, available in the U.S. at AT&T stores, Wal-Mart and Best Buy, in addition to Apple outlets.

Shares of Cupertino, California-based Apple rose 1 percent in premarket trading to $137.57.

(Reporting by Franklin Paul and Gabriel Madway; Editing by Tiffany Wu and Brian Moss)

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