Ehh, im not sure they could have milked it for very long, if the iphone didn't come out somebody else would have made the same kind of device within a year or two and made ipods obsolete shortly after. PDAs were already a thing with many models and competitors, cell phone transceivers were getting far smaller and efficient, and solid state storage was getting reasonably cheap.

The most impressive thing about the iphone I didn't think has anything to do with the technology, and everything to do with timing the release of a mobile device to hit the sweet spot between the cost of the hardware and capability of the hardware.

I think you greatly underestimate the iPhone’s original impact and the reason that other very successful companies went out of business entirely due to it. It broke new ground in more than just technology e.g. also in the relationship between the phone manufacturer and the carrier, and advantage it kept for some time and in the software developed for it e.g. a full browser versus WAP.

Where I lived in Europe, by the time the iPhone came out, a lot of people (me included) were already using Sony Ericsson Walkman phones instead for music listening