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'We believe this is the first of many cell phones from AAPL with AAPL having the potential to revolutionise the space,' Wu wrote in a note to investors. 'While its $499 and $599 price points appear high, they are highly functional devices and best-in-class. We would not be surprised to see simpler cell phones in the future at much more aggressive price points. We believe AAPL will likely follow its iPod strategy, which is to start out at the high-end and then trickle down to mid-range and low-end.'

Wu described the phone-cum-iPod-cum-Internet communicator as impressive and ambitious.

'We are very impressed with iPhone and its minimalist touchscreen design, though we find the functionality much more ambitious and aggressive than we anticipated for a first phone,' he wrote.

He added that he was surprised at the timing of the announcement, which he expected later in the year, and that the anticipated release of widescreen iPod and a mobile phone was in fact one device.

'We had picked up from our supply chain sources a candy bar form factor, widescreen technology, and Bluetooth, however, we did not anticipate it to be just one device,' he wrote.

'In terms of functionality, we find the multi-touch interface, full-page web browsing, free Yahoo email access, widescreen vPod, and tight integration with iTunes the most compelling and competitive differentiators.'

Wu added that he thinks Apple TV could be the surprise hit.

'We believe the Apple TV set-top box product is positioned to be a surprise hit similar to the iPod shuffle,' he wrote. 'We find its $299 [£199] pricing with 40GB HDD particularly attractive and likely to attract volume.'

Piper Jaffray analyst Gene Munster said that Apple has reinvented

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itself, not just the phone, as Jobs claimed in the unveiling on Tuesday.

'As evidenced by the fact that Apple officially removed the word "computer" from its name and has added mobile devices and the digital living room to the two existing product categories of computers and digital music, Apple is clearly becoming a consumer digital lifestyle company vs. just a computer and music device company,' he wrote in his investors' note.

He said that the iPhone is even better than Wall Street's reaction - soaring Apple stock - would suggest.

'We believe the form factor and features of the iPhone are more favourable than general Street thinking,' Munster wrote. 'At the risk of playing into the hype of the iPhone, seeing is believing with this device.'

He added that although Apple has dropped computer from its name, it can expect to sell more Macs on the back of the iPhone and Apple TV.

'Ironically, however, these added non-Mac products should only further accelerate the halo effect and increase Mac market share as well,' he wrote.

Ben Reitzes of UBS described the iPhone as a 'stunner' and upped his 12-month target price for Apple stock, currently $97, from $108 to $118.

'We are particularly excited about the iPhone's potential to boost revenue and earnings with not only hardware, but also services and accessories,' he wrote.

Bear Stearns' Andy Neff similarly raised his target price, from $100 to $125.

'With over one billion unit shipments expected to ship in 2007, mobile phones represent a significant growth opportunity for Apple, coupled with video which is also in its early stages and could evolve into a multi-year story,' he wrote.

He said that Palm could be a casualty of Apple's new direction - 'iPhone represents a significant risk to Palm given its device-only model with similar average-selling-price to iPhone' - but RIM has less to worry about as its BlackBerrys have features that differentiate them from the iPhone.

'While iPhone may emerge as a competitive smartphone, we would buy RIM on weakness given iPhone's lack of corporate email, price premium vs. RIM, and sole availability at Cingular and in US,' he wrote.

Both Palm and RIM saw their share prices slip as the iPhone was unveiled.

Credit Suisse also raised its target price, to $120 from $90.