SAN FRANCISCO (Bloomberg) — Apple Inc. chief executive officer Steve Jobs stopped short of giving outside developers a way to incorporate applications into the company's iPhone handset.The shares fell 3.5 percent after Jobs announced the decision not to give developers a kit that would allow them to write specialised programs for the iPhone. Instead he said they will be able to write web-based programs that iPhone users can access through Apple's Safari browser.

The move marks a compromise between Jobs, who wanted to keep control over the new device, and code writers who wanted to craft programs to run right on the phone and tap a booming business. Jobs expects to sell 10 million iPhones in 2008 to capture a one-percent share of the mobile-phone market.

"Some developers will be disappointed that they won't be able to create specialised applications that run on the iPhone," said Gene Munster, a Piper Jaffray & Co. analyst. "Instead these will have to be run through Safari."

Jobs said the decision allows Cupertino, California-based Apple to maintain the security of the iPhone, the company's first mobile-phone, and yet still provides developers an opportunity to write new software for the device.

"We think we have a very sweet story for you," Jobs said yesterday at Apple's global developers' conference in San Francisco.

Apple shares fell $4.30 to $120.19 at 4 p.m. in Nasdaq Stock Market trading. The iPhone helped propel Apple's market value above $100 billion last month for the first time in the company's 31-year history. The shares reached a record high of $127.61 last week.

Jobs, 52, at first said he wouldn't allow any access for developers and then hinted May 30 that he had changed his mind, saying at a conference he would "find a way" to let them add programs while keeping the iPhone secure.

Apple yesterday said developers will be able to create "applications which look and behave just like the applications built into the iPhone".

Safari has 4.9 percent of the browser market, Jobs said yesterday, behind Microsoft Corp.'s Internet Explorer and Firefox. To boost adoption, Jobs said the company will release a version for Microsoft's Vista and Windows operating systems.

Apple says it has more than 750,000 developers, who have written more than 12,000 programs that use its Mac OS X personal- computer operating system. Sales of the PC have accelerated in the past two years, after Jobs delivered faster models with Intel Corp. chips and sleeker designs.

"They're trying to make it easier for developers to create applications for the iPhone using basic web development tools" instead of tools specifically created by Apple for the iPhone, Munster said. "The concept is good, but the real proof will be in what kind of applications developers can create."

Apple will sell two models of the phone, a 4-gigabyte version for $499 and an 8-gigabyte model for $599, with help from AT&T Inc., the largest US mobile phone service. The iPhone has a touch-screen display instead of a physical keyboard and lets users surf the web and access e-mail from services including Yahoo! Inc. and Google Inc.

The iPhone will compete with so-called smart phones such as Research In Motion Ltd.'s BlackBerry.