Apple Inc. (AAPL) unveiled the first major upgrade to its iPhone operating system in nine months, introducing software that allows the popular smartphone to perform some of the functions its competitors already can.

The Cupertino, Calif.-based company also rolled out new development tools for companies that build and sell iPhone programs, and revamped its App Store, which sells iPhone software downloads.

Most of the 100 new iPhone features Apple announced included items like "cut and paste" to capture and transfer text, and the ability to send emails with attached voice recordings, photos or contact files, as well as the addition of "Spotlight" for searching the iPhone's contents. These features, in various forms, can already be found on competing smartphones based on software from Research In Motion Ltd. (RIMM), Microsoft (MSFT) and Palm Inc. (PALM).

The biggest change Apple disclosed is the addition of something called "push," which solves a major issue slowing adoption of iPhone instant messaging and other applications that need to run when the iPhone is off. Apple's workaround involves automatically updating software programs once the phone is turned back on, as well as letting the software retrieve updates automatically when running.

Apple Senior Vice President Scott Forstall said Tuesday that Apple, which had promised "push" some time ago, was "late" in delivering it. "We had to rebuild the software to do it," he added. "Here it finally is."

Apple also said its iPhone App Store, which sells iPhone software, will also soon let developers sell subscription-based software products. This would allow, for instance, a game maker to sell updated scenarios, or an e-book reader to include a library of books as well.

The new iPhone operating system also now supports peer-to-peer connections, which lets users easily swap files with each other.

Apple said it was giving third-party accessory makers and developers even greater control over the iPhone's functions. Meanwhile, accessories now being built allow control of the iPhone from the accessory itself. For example, one pair of third-party headphones can find the iPhone wirelessly and one manufacturer is making a blood-pressure cuff that works with the phone.

Apple's iPhone announcements underscore how competition in the smartphone market is increasingly shifting to software and interface issues, as opposed to design or specification of the hardware. Since the iPhone first went on sale about 18 months ago, Palm Inc. has improved its Pre smartphone and Research In Motion has upgraded its Blackberry line to close the gap on hardware. Apple is now trying to use its software to maintain its edge.

Apple said users had downloaded 800,000 programs from its App Store, the online software bazaar for the iPhone. It also said it was selling roughly 25,000 titles on the mobile platform.

Apple and other smartphone makers face a tough 2009. Market research firm IDC recently cut its growth forecast for global smartphone sales to 3.4% from 8.7%.

Apple had a 10.7% share of the worldwide smartphone market at the end of 2008 after nearly doubling its market share from a year ago, according to Gartner Inc., another research firm. Ahead of Apple were No. 1 smartphone seller Nokia Inc. (NOK), whose 40.8% share is more than double that of Research in Motion, the No. 2 manufacturer.

Apple shares were recently up 1.5% at $96.91.

-By Ben Charny, Dow Jones Newswires; 415-765-8230; ben.charny@dowjones.com