SAN FRANCISCO – Apple Computer (AAPL) CEO Steve Jobs on Tuesday made the company's long-awaited jump into the mobile phone business and renamed the company to just "Apple Inc.," reflecting its increasing focus on consumer electronics.
The iPhone, which starts at $499, is controlled by touch, plays music, surfs the Internet and runs the Mac OS X computer operating system.
Jobs said it will "reinvent" the telecommunications sector and "leapfrog" past the current generation of hard-to-use smart phones.
• Click here for FOXNews.com's special Consumer Electronics Show section.
• Click here for FOXNews.com's Personal Technology Center.
"Every once in a while a revolutionary product comes along that changes everything," he said during his keynote address at the annual Macworld Conference and Expo. "It's very fortunate if you can work on just one of these in your career. ... Apple's been very fortunate in that it's introduced a few of these."
He said the name change is meant to reflect the fact that Apple has matured from a computer manufacturer to a full-fledged electronic retailer.
"I didn't sleep a wink last night," he said. "I was so excited."
Jobs also unveiled a TV set-top box that allows people to send video from their computers.
Apple shares jumped 5 percent on the announcements.
Jobs demonstrated the phone's music capabilities by playing "Lovely Rita, Meter Maid," from the Beatles' "Sergeant Pepper's Lonely Hearts Club Band," as the album's psychedelic album art graced a wide-screen monitor.
IPhone uses a patented touch-screen technology Apple is calling "multi-touch."
"We're going to use a pointing device that we're all born with," Jobs said. "It works like magic. ... It's far more accurate than any touch display ever shipped. It ignores unintended touches. It's super smart."
The phone automatically synchs your media — movies, music, photos — through Apple's iTunes Store. The device also synchs e-mail content, Web bookmarks and nearly any type of digital content stored on your computer.
"It's just like an iPod," Jobs said, "charge and synch."
The phones, which will operate exclusively on AT&T Inc.'s (T) Cingular Wireless network, will start shipping in June. A 4-gigabyte model will cost $499, while an 8-gigabyte iPhone will be $599, Jobs said.
IPhone is less than a half-inch thin — slimmer than almost any phone on the market today. It comes with a 2-megapixel digital camera built into the back, as well as a slot for headphones and a SIM card.
In a demonstration Tuesday, Jobs slid his finger across the display to reveal a home screen and then scrolled through a list of songs.
To make a call, users can tap out the number on an onscreen keypad or scroll through their contacts and dial with a single touch.
Apple is also introducing what it calls "visual voicemail," so users can jump to the most important messages rather than have to listen to all of them in order.
The phone supports Wi-Fi and Bluetooth wireless technology and can detect location from Global Positioning System satellites. It also can send and display e-mail and text messages. Apple is partnering with Yahoo Inc. (YHOO) on Web-based e-mail and Google Inc. (GOOG) on maps.
With a few finger taps, Jobs demonstrated how to pull up a Google Maps site and find the closest Starbucks to San Francisco's Moscone Center. He then prank-called the cafe and ordered 4,000 lattes to go before quickly hanging up.
Also Tuesday, Jobs said Apple will begin taking orders immediately for the $299 video box called Apple TV. It will ship next month.
The gadget is designed to bridge computers and television sets so users can more easily watch their downloaded movies on a big screen. A prototype of the gadget was displayed by Jobs in September when Apple announced it would sell TV shows and movies through its iTunes online store.
The product could be as revolutionary to digital movies as Apple's iPod music player was to digital music. Both devices liberate media from the computer, allowing people to enjoy digital files without being chained to a desktop or laptop.
"It's really, really easy to use," Jobs told the crowd at the Moscone Center before demonstrating the system with a video clip of "The Good Shepherd." "It's got the processing horsepower to do the kinds of things we like to do."
Apple TV will come with a 40-gigabyte hard drive that stores up to 50 hours of video. It features an Intel Corp. (INTC) microprocessor and can handle videos, photos and music streamed from up to five computers within the wireless range.
Jobs also said Apple has sold more than 2 billion songs on its popular iTunes music download service, catapulting the company into the top ranks of music sellers worldwide.
Apple, which sells 58 songs per second, or 5 million songs a day, sells more songs than Amazon.com (AMZN) and ranks behind only Wal-Mart (WMT), Best Buy (BBY) and Target (TGT) as a music retailer.
"We couldn't be happier with the growth rate of iTunes," Jobs said.
He said Apple will sell digital movies from Paramount. Apple has partnered with Disney (DIS) for several months, offering about 100 movies on iTunes. With Paramount's selection, it will have 250 movies available for downloading on the site.
With Tuesday's launches, it remains to be seen whether the leading seller of digital music players can colonize an entirely new category of gadgets.
Apple could use a megahit along the lines of its iconic iPod to divert investors' attention from the stock options-backdating scandal that has tainted its reputation.
The backdating of stock options, which has been widespread among Silicon Valley companies, involves pegging stock options to favorable grant dates in the past to boost the recipients' award. It isn't necessarily illegal, but securities laws require companies to properly disclose the practice in their accounting and settle any charges that may result.
In a December filing with the Securities and Exchange Commission, Apple said Jobs was aware of, or recommended the selection of, some favorable grant dates but he neither benefited financially from them nor "appreciated the accounting implications."
Apple shares were up $4.29 to $89.76 in midday trading on the Nasdaq Stock Market. The stock has traded in a 52-week range of $50.16 to $93.16.
Cingular Wireless and Motorola (MOT) launched an Apple-related phone and MP3 player, called the ROKR, in 2005.
But the product was widely considered a flop because it could only hold 100 songs and it required users to buy songs through a computer and download the songs to the phone.
The mere suggestion that the maker of the iconic iPod might make a cell phone that downloads, plays and shares digital music has intimidated traditional telecommunications companies such as Motorola, Nokia Corp. (NOK), Samsung Electronics Co. and Verizon Wireless.
"Even if Apple does not announce a phone, just the threat of Apple's entry could spur innovation," Avi Greengart, an analyst with Current Analysis, wrote in a research note last week. "If Apple builds a phone that is easy and genuinely pleasurable to use, the company will have a winner no matter how it is priced or sold."
Get all the stories you need-to-know from the most powerful name in news delivered first thing every morning to your inbox