iPhone combines three products — a revolutionary mobile phone, a widescreen iPod with touch controls, and a breakthrough Internet communications device with desktop-class email, web browsing, maps, and searching — into one small and lightweight handheld device. iPhone also introduces an entirely new user interface based on a large multi-touch display and pioneering new software, letting you control everything with just your fingers. So it ushers in an era of software power and sophistication never before seen in a mobile device, completely redefining what you can do on a mobile phone.

Technology giant Apple Computer Inc. formally entered the fiercely competitive mobile phone market yesterday with the long-awaited unveiling of the iPhone, a blend of its hugely popular iPod music/video player and state-of-the-art cellphone technology.

"Every once in a while, a revolutionary product comes along that changes everything," Steve Jobs, Apple's co-founder and chief executive officer said as he unveiled the iPhone at the MacWorld conference in San Francisco yesterday morning.

The iPhone, according to technology analysts, is something Apple needs to defend its lucrative iPod turf in the wake of recent announcements by cellphone giants such as Motorola Inc. and Nokia Oyj, which have introduced smart phones that can play music and are aimed at the consumer market.

Investors yesterday appeared to signal that Apple may have an early hit on its hands. Shares of Apple jumped more than 8 per cent on the announcement while shares of rival device makers, such as Waterloo-based Research In Motion Inc., fell.

Shares in RIM, maker of the dominant BlackBerry wireless device, shed $12.82 or 7.68 per cent to close at $154.01 on the Toronto Stock Exchange.

Apple unveiled two versions of the iPhone – four- and eight-gigabyte models which will sell for $499 (U.S.) and $599 respectively in June when they become available in the United States.

There were no announcements on when the phones will be available in Canada or on pricing here.

Jobs also announced exclusive partnerships with Yahoo and Google to provide email, web searches and Google maps through the new device. It runs a version of OS X, the same operating system that powers the company's Mac computers.

A proximity sensor allows seamless switching between phone calls and music, Jobs said, automatically pausing music or video when the phone is held close to the ear. And visual voice mail allows the user to view a list of voice mail and choose without listening to all of them.

Analysts were split yesterday on how successful the iPhone will be.

"It does serve a specific individual consumer and their existing installed base of iPod users. They're a hard-core group and for them to refresh it, that's one segment of the market," said Eddie Chan, research analyst with IDC Canada. "It's still a very feature-rich device that will draw enthusiasts from the mass market."

Apple is known to push the envelope with friendly user interfaces, form and factor design, he added. "It's that digital lifestyle; in terms of mobility, it extends the power of the device, which is highly personal."

Research Capital analyst Nick Agostino said investors yesterday were reacting to the potential for a tough battle for high-end consumers between Apple and smart-phone makers such as RIM, Nokia, Motorola and Palm.

"Obviously, there is that level of uncertainty," Agostino said. "We won't find out for another six months what real impact (the iPhone) is going to have in the channels."

RIM diversified from the business market with the introduction of the BlackBerry Pearl last year, with camera and flexible storage options and aimed it at the mass market. Rumours of two more RIM devices in the same vein –the Indigo and the Crimson – are also swirling on fan sites and among analysts.

RIM is unlikely to lose its core business audience to the iPhone, according to Chan.

"Governments are not going to buy iPhones for their employees," he said.

But the launch of the iPhone could turn consumer-market expansion plans into a tough slog for RIM, some analysts said.

"The iPhone will be a stiff competitor in terms of the consumer marketplace," said Lawrence Harris, an analyst at Oppenheimer & Co. Inc.

Yesterday, Apple also formally introduced the Apple TV, previously known as iTV. The set-top unit, first previewed in September, permits wireless streaming of video from a computer to a television set.

The Apple TV will ship in February in the U.S. There was no announcement on when it will be available in Canada.

Jobs also said yesterday that Apple Computer Inc. is changing its name to Apple Inc., reflecting its increasing focus on consumer electronics.