Hackers calling themselves the iPhone Dev Team have reported breaking into the iPhone firmware upgrade that ships with the recently launched software development kit for the smartphone.

The group reported late Tuesday it had "decrypted the disk image and jail-broken the firmware." In essence, the hackers had found a way to run applications on the firmware without a development certificate from Apple.

To show its work, the group posted screenshots of applications running on the beta version of the firmware, which Apple plans to ship in its final form as iPhone 2.0 in June. The developers said their applications only work with "hacked activation," which means they won't work on iPhones from exclusive wireless service provider AT&T.

"However, come on, this is like 2 hours ago it happened, you AT&T folk won't be left in the cold," the group said.

If true, the hack calls into question whether Apple will be able to maintain the tight-fisted control it wants on iPhone application development. Apple is requiring independent software developers to submit their work to Apple, which will be the exclusive distributor through the company's new online App Store. Developers can set their own price for the software, but Apple takes 30% of sales revenues.

Apple released the SDK in beta March 6, giving developers the same tools and application programming interfaces that Apple engineers use to develop iPhone software that runs directly on the smartphone's Mac OS X-based operating system.

Before releasing the SDK, Apple tried to keep all application development restricted to the device's Safari Web browser. That plan, however, fell apart as developers complained they needed access to the iPhone's OS in order to build richer software.

Meanwhile, Apple on Wednesday reported more than 100,000 downloads of the iPhone SDK in the first four days following its launch.

The SDK is available in beta through Apple's developer Web site. The toolset is available at no charge and is being distributed first in the U.S. The developer program will be expanded to other countries later in the year.

Apple plans to distribute version 2.0 of the iPhone OS at no charge. The upgrade will include support for applications built with the SDK. Apple also plans to make available at the same time for a "nominal fee" a similar upgrade for the iPod Touch, which uses the same firmware.