Really? Did Sun create a multitouch API from the ground up like Apple? There were plenty of "smartphones" before the iPhone but what they had in common was that they all sucked. They had their little clicky keyboards and mouse substitutes and they ran like miniature laptop computers with interfaces from the 80's that were not even compelling on laptops. On top of all that you are putting forth a prototype as your example. Are you for real? A prototype? That's hilarious.
What is most amusing is touting the Apple Store as the seeds of Apples downfall. I remember how the idea was mocked as naive and incompetent by citing previous failed efforts like the Gateway stores. However, as the Apple Store has become possibly the most successful retail store in history the critics have quietly shuffled off and learned that their insights might be less than perfect. But not you. Impending disaster. Apple is Doomed!
By the way, the reason for Apple's success is that it is not Apple, It is Next Computer wearing an Apple skin. Apple acquired Next but it was actually a takeover of Apple by Next. The OS, NextStep, is the basis of the system software of all the Apple devices. Even as Next was fading it was acknowledged that it was a superb OS but it had arrived too late and lacked the critical mass of users needed to survive. The Apple acquisition and transition from MacOS changed that factor by stealth. There are other important factors, like the successful launch of the Apple Store, but Apple with MacOS would not be where it is today.