Apple Inc. (AAPL) sold more than 1 million units of its next-generation iPhone 3G S on its first weekend of sales, defying those who had predicted it wouldn't reach the levels attained during its predecessor's launch.

Apple also said 6 million customers downloaded its new iPhone 3.0 software in the first five days since its release.

"iPhone momentum is stronger than ever," Apple Chief Executive Steve Jobs said in the company's press release. Over the weekend, The Wall Street Journal reported that Jobs received a liver transplant two months ago. The 54-year-old, who has been on medical leave since January, is expected to return to work later this month.

The first weekend for the iPhone 3G S basically matched the launch last year of the iPhone 3G, a surprising development because the latest iPhone was being released in fewer countries, eight versus 21, and was perceived to offer fewer changes of significance.

Nonetheless, the phone's strong performance - at a time when consumers are generally being frugal in their spending - reflects the increasing popularity for smart phones and the attraction of the iPhone brand itself.

Analysts - who generally expected sales in the half-million range - said the stronger-than-expected sales were due, in part, to owners of the original iPhone from two years ago refreshing their smart phone.

It wasn't known how many sales were to new customers or old ones, and a representative from Apple wasn't available to comment.

The iPhone sales news is helping Apple shares hold up better Monday, in an otherwise dreary day for the market and as the stock absorbs the latest Jobs' health news. Apple shares recently lost 1.9% to $136.82; in comparison, the S&P 500 fell 2.9% to 894.69.

Shares of AT&T Inc. (T) - the U.S. provider for the iPhone - slipped only 2 cents to $24.02.

The sales news seems to be weighing on the iPhone's rivals. Shares of Blackberry maker Research In Motion Ltd. (RIMM) fell 6.7% to $67.88, while Palm Inc. (PALM) - maker of the newly released Pre - dropped 6.7% to $13. Sprint Nextel Corp. (S), which provides service for the Pre, fell 1.8% to $4.87.

Needham & Co. analyst Charles R. Wolf said part of iPhone's attraction is the large offering of applications that boost the phone's productivity. Apple's App Store includes more than 50,000 software programs, by far more than rivals.

"The iPhone literally is a computer now. It can make calls, but the other stuff it can do is truly amazing."

Caris & Co. analyst Robert Cihra said Apple was able to post strong sales in the tough environment because of continuing high demand for smart phones.

"Even against the backdrop of a weak or declining cell-phone market, the percent moving to smart phones is increasing," Cihra said, adding that BlackBerry maker Research In Motion and Apple have been able to take market share from other cell-phone companies. "It's an increasing percent of the pie, even if the pie isn't growing."

One group, though, likely not participating in the iPhone's sales surge is business customers, as the vast majority of iPhone users remain consumers.

The BlackBerry has long been the "gold standard" for business-phone users, and analysts said Apple is still a long way off from penetrating the market, though it has introduced some new features that could appeal to the business user.

"With each revision of the operating system, they're adding more business friendly features," Needham's Wolf said, adding that one new feature is remote wipe, the ability to delete all the data off a phone should it be lost.

That feature increases the security of the phone, which analysts said is one of the main concerns enterprises have about the iPhone.

"If you look at Apple historically, it hasn't been all that successful ... in enterprise," Caris' Cihra said, adding that the BlackBerry's strong security features appeal to businesses. "Just to make any traction in enterprise, you have to make traction in security, and Apple is just getting started."

In addition, even if corporations want to use the iPhone, it likely will take a while for the company's information technology to adopt standards for its use.

For the most part, analysts said, iPhone is "entering businesses through the back door." Consumers buy the phone and then take it with them to work, requesting IT support and using the phone for work-related and personal purposes.

"The key point is that even in the business market, the owners of the iPhone are going to use it outside business for personal use," Needham's Wolf said. "The phone has over 50,000 applications, and a lot of software companies are adding business-oriented applications. Developers are smoothing the way into enterprise."

-By Shara Tibken, Dow Jones Newswires; 212-416-2189; shara.tibken@dowjones.com;

(Tess Stynes contributed to this report.)