After the iPod, Apple takes aim at the phone

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Apple sought to capitalize on its success with the iPod yesterday with the launch of a new mobile phone it said would act as "your life in your pocket". The iPhone will allow users to email, surf the internet, take pictures, play music and watch TV shows and films.

The iPhone will be controlled by a touch-sensitive screen and, unlike other phones, will have full access to the internet. Travellers should be able to check maps, football scores or watch television on the go. Apple said the device would do away with the need to carry a mobile phone, MP3 player and Blackberry.

Just as the iPod had changed the way people listen to music, Apple chief executive Steve Jobs said the touchscreen iPhone would transform hand-held technology. "We want to reinvent the phone," he told more than 2,000 people at his annual address to the Macworld conference in San Francisco. "I think when you get your hands on this you will agree we have reinvented the phone." As he concluded his speech, he declared: "iPhone is like having your life in your pocket. It's the ultimate digital device." A £250 version of the phone, which was welcomed by technology experts, will be launched this summer. Its launch sent Apple's share price soaring.

Jobs had been under pressure to announce a spectacular product amid a US Government investigation into the handling of executive share options at the Silicon Valley company. An analyst's report last month claimed sales at the iTunes online music shop had slumped.

However, in a robust defence, Jobs said the number of iTunes downloads had doubled last year and passed the two billion mark overall. Sales of movies hit 1.3m in the first six months of 2006 and the Hollywood studio Paramount is joining Disney in the scheme.

Jobs confirmed Apple would be pressing ahead with the launch of the AppleTV, a device he previewed last September for transferring downloaded TV shows and movies wirelessly onto television sets.

However, the majority of his two-hour presentation was devoted to exploring what he claimed were the extraordinary properties of the iPhone.

He said the device combined three "revolutionary" features - a high resolution widescreen iPod, a large screen for television shows and movies; and a mobile phone that allowed the viewing of an entire web page.

The phone was "five years ahead" of the competition, he said, adding that Apple had filed more than 200 patents for the device.

"We wanted to make a leapfrog product that is way smarter than anything before," Jobs said. "We're going to get rid of the buttons and just have a giant screen." He showed how the phone could flip seamlessly from playing music, to answering a call, to emailing a photograph. Using Google's online maps, an iPhone user can instantly locate something or someone, in this case a Starbucks cafe in San Francisco. As an unwitting café worker answered the phone, Jobs said: "I'd like to order 4,000 lattés to go."

With an 8.75cm screen, the picture quality will be 160m pixels per inch. "We've been innovating like crazy on this in the last few years," Jobs said. In a deal with the US phone giant AT&T's mobile unit Cingular, the iPhone will be launched in the US in June and in Europe in the last quarter of this year. It will be launched in Asia in 2008. A 4Gb version will sell for $499 (£260) and an 8Gb version for $599.

Overall, one billion mobile phone handsets are sold every year and Apple aims to secure one per cent of the market, some ten million phones, by 2008.

Tom Dunmore, editor in chief of Stuff magazine, said Apple might have difficulty breaking into the mobile phones market because of strong competition. "I think people may be a bit daunted," he said. "There are a lot of things on the iPhone, and for the mass market it might prove just a little too complex. Having said that, it's an example of wonderful technology and it's years ahead of the competition. It's the most exciting thing I've seen in years."

Apple milestones

1984: Apple Macintosh: The Apple Mac was launched with inbuilt screen, selling at $2,495 (£1,750).

1989: Mac Portable: At $6,500, the Portable never became popular.

1993: Newton Message Pad: Battery-powered desktop assistant for $699.

1998: iMac: Hugely popular, giving Apple its first profitable year since 1995. Selling for $1,299, it had no floppy disk drive.

2001: iPod: Storing over 1,000 songs and selling at $399, the MP3 player is now ubiquitous in its many forms.

2003: iTunes: More than 1.5 billion tracks have been sold on the website where tunes are downloaded by track or album.