Apple Proclaims Its Revolution: a Camera, an Ipod ... Oh, and a Phone

It is the logical synthesis of two of the most ubiquitous pieces of technology.

An sleek black device, almost certain to be found in thousands of handbags and pockets before the end of the year, was seen for the first time yesterday when Apple unveiled its widely anticipated iPhone.

The touchscreen handset will combine internet access and iPod music with a built-in 2 megapixel digital camera and video playback features.

Apple's chief executive, Steve Jobs, launched what he called a "magic", "super-smart", super-hyped device, which also provides the more mundane functions of the traditional phone.

The iPhone will use Apple's OSX operating system and allow users to watch films and download songs, store photos, as well as offering email, calendar and contacts services found in products such as the Blackberry.

The announcement, widely expected by industry insiders, was greeted with cheers from a loyal audience of Apple fans at the Macworld Expo in San Francisco. Mr Jobs said that the iPhone would "reinvent" the telecommunications sector.

"Every once in a while a revolutionary product comes along that changes everything," he told his audience yesterday. "It's very fortunate if you can work on just one of these in your career. The iPod changed everything in 2001. And we're going to do it again with the iPhone in 2007."

The handset dispenses with buttons, in favour of a powerful screen that responds to touch. The iPhone also shows album artwork and functions as a personal organiser. It has a proximity sensor that automatically deactivates the screen and turns off the touch sensor when the device is raised to a user's face. The battery life of the phone will allow five hours of talk time, video and browsing, and 16 hours of audio playback. A 4Gb model will be available for $499 (£257) and an 8Gb model for $599 (£309). The iPhone will be available in the US from June, in Europe from October and in Asia in 2008. To protect the iPhone, Mr Jobs said the company had filed more than 200 patents.

"In 2001 we introduced the first iPod, and it didn't just change the way we listen to music - it changed the entire music industry," he said.

"Today we're introducing three revolutionary products in this class: an iPod, a phone and an internet device ..."

As well as functioning as a music and video iPod it offers services such as "visual voicemail", which shows users a list of their messages so they can go straight to the ones they want to listen to most.

Designed by Jonathan Ive, who also created the iPod and iMac, Apple will be hoping to cash in on its status as a fashionable brand with an eye on simplicity. Mr Jobs has criticised current mobiles for being too confusing and awkward to use. Experts have said that Apple sorely needed to produce a phone with music capabilities as long-term protection for the lucrative iPod, which has helped boost the company's profits to record levels.

The rise of mobile phones with built-in music features has begun to threaten the iPod's dominance, forcing Apple to join an already-established market. The iPod's sales of 70m since 2001 are dwarfed by the phone industry, which expects to sell more than a billion handsets this year alone. Taking a significant chunk of the handset market away from leading rivals could propel the Californian company to the highest point in its 30-year history.

But some believe the going may be more difficult. On the eve of the announcement Microsoft - which began selling its own music player, the Zune, last year - launched a broadside at its competitor. "It's probably on the table of things for us to look at but not the number one thing we are focused on," its vice-president, Robbie Bach, told analysts. During his speech in San Francisco, Mr Jobs also revealed that Apple would drop the word computer from its full name Apple Computer Inc and would from now on be known as Apple Inc, reflecting its increasing focus on consumer electronics.

Many of yesterday's announcements had the feeling of inevitability, coming after several years of speculation and previews. In 2002 it emerged that Mr Jobs was considering the possibility of a mobile handset as an attempt to break into the technology markets. But nothing concrete had emerged until Mr Jobs took the stage yesterday. The closest Apple came was in 2005, when the company launched an unsuccessful attempt to make iPod-compatible phones with Motorola. Apple shares jumped more than 6% yesterday, while the stock of rival smart-phone makers plunged.