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Apple Computer Inc. shook up the technology world and stock markets Tuesday when it unveiled a skinny cellphone that it says will revolutionize the world's most popular consumer electronics device.

Observers are already predicting the iPhone will be a force to be reckoned with in the cellphone industry that will prompt existing manufacturers such as Motorola Inc., Nokia Corp., Palm Inc. and Research In Motion Ltd. to revise their own designs.

Those companies' stocks took a beating Tuesday as investors fretted about a new rival entering a market where competition is already intense. Shares of RIM, maker of the BlackBerry, slid $12.82 to $154.01 on the Toronto Stock Exchange. On the Nasdaq Stock Market, it fell $11.16 (U.S.) to $131. RIM was also hurt because a rumoured partnership with Apple didn't transpire.

Elsewhere in the sector, shares of Motorola dropped 34 cents to $18.26 on the New York Stock Exchange, Nokia slipped 26 cents to $19.38 on the NYSE, and Palm declined 84 cents to $13.92 on the Nasdaq. Shares of Apple, in contrast, climbed $7.10 Tuesday to $92.57, adding $6.1-billion to its market capitalization.

The creator of the Macintosh computer has already turned one consumer market on its head. Apple's iPod persuaded consumers to download digital songs, television shows and films, rather than running out and purchasing CDs and DVDs.

“It's certainly going to put pressure on people like Nokia and RIM to innovate and try to create a similar product,” said Brian Sharwood, a Toronto-based analyst at telecommunications consulting firm SeaBoard Group.

One of the biggest changes introduced with the sleek new Apple phone is the absence of buttons, replaced by a 3.5-inch screen that users touch to make a call or send an e-mail. And the iPhone not only includes features such as a camera, but Apple's popular iPod music device as well.

The iPhone's debut combined with Apple's plan, also revealed Tuesday, to rebrand itself by dropping “computer” from its name are further steps in its dramatic journey from a niche computer maker into a technology trendsetter with widespread appeal among consumers.

Apple's chief executive officer and co-founder Steve Jobs, who rejoined the company in 1997, has spearheaded that makeover.

“They always had a neat reputation with computer geeks as having a very elegant product,” said Darren Meister, an associate professor of information systems at the Ivey School of Business at the University of Western Ontario. “They were chic for geeks, and now they're chic for everyone.”

Ten years ago, people would have been surprised to hear that Apple was rolling out a cellphone, Mr. Meister said. “Now, it's like, ‘can you imagine what they're going to do for cellphone design?'”

Lawrence Harris, an analyst at Oppenheimer & Co., believes part of the decline in RIM's stock price can be attributed to disappointment after a rumoured partnership between the company and Apple, which would have created an “AppleBerry” device, did not occur.

Still, the extent of the iPhone threat only goes so far, according to Mr. Harris. The new arrival isn't directed at RIM's large corporate customer base, but instead will go up against RIM's new BlackBerry Pearl device in the consumer market.

“Corporate CIOs [chief information officers] tend to be a conservative lot,” Mr. Harris explained. “They tend to go with what they know ... I don't think any of that is going to change at all, but there could be some impact down the road if the intent of RIM is to move more into the consumer market.”

But even then, some observers believe price could prove a barrier. U.S. wireless carrier Cingular Wireless LLC said Tuesday it will offer two versions of the iPhone, for $499 and $599, respectively, with a multiyear contract.

“It's not going to revolutionize the industry quickly because of the price point...,” Mr. Sharwood said.

While the iPhone was in the spotlight Tuesday, it wasn't the only new consumer product that Apple introduced at its annual Macworld conference in San Francisco. It also launched the Apple TV service that lets users wirelessly play videos and films that they downloaded on their Mac or PC on their TV set. Internet video downloads are still a small market, but Apple wants to be there when it takes off, observers believe.