Shares in Apple closed 8% higher on news that it was launching a touch screen mobile phone, the iPhone.
News of the device sent shares in makers of so-called 'smart phones' - such as the Blackberry - sharply lower.
Costing from $499 (£257), the iPhone will be on sale from June in the US and from October in Europe. It will operate on the Cingular Wireless network.
Also at the Macworld event in San Francisco, boss Steve Jobs said the firm would be known simply as "Apple".
The decision to switch from the Apple Computer brand was an indication of the firm's focus on consumer electronics, Mr Jobs said.
The iPhone, with 4 gigabytes (GB) of memory, will cost $499 while a model with twice the memory space will be $599, albeit only if the customer takes out a two-year contract with a phone company.
Apple expects to sell just one million of the devices in the first year.
But Mr Jobs predicted that in 2008, when the phone will become available in Asia, Apple could sell 10 million iPhones, equivalent to 1% of today's yearly mobile phone market.
Andrew Seibert, of Stewart Capital Advisors, said phone firm Verizon might have to watch out and that other manufacturers "may have some problems".
Analyst Shannon Cross of Soleil Cross Research said the move would lead consumers to "upgrade some of the existing iPods" but more crucially it would cause greater competition for existing smart phones.
Shares in makers of smart phones fell on the news, with Research in Motion - the company behind Blackberry devices, tumbling nearly 8% on the Nasdaq.
"We won't find out for another six months what real impact (the iPhone) is going to have in the channels," said Research Capital analyst Nick Agostino.
But after the announcement, the market reacted to potential stiff competition between Apple and the likes of Nokia, Motorola and Palm, for high-end consumers.
Users will be able to download music to the phone through from iTunes, as well as take photos.
Mr Jobs said: "Most advanced phones are called smart phones. But they are actually not so smart, and really not so easy to use.
"We are all born with the ultimate pointing device - our fingers - and iPhone uses them to create the most revolutionary user interface since the mouse,"
The iPhone name is currently owned by Cisco, which said it expected to reach an agreement with Apple over the trademark.
The two firms have been in talks and a Cisco spokeswoman said she expected a deal to be struck imminently.
By the close of trading, Apple shares were $7.10 higher at $92.57. AT&T, the firm behind Cingular Wireless, saw its shares add 13 cents, to $33.94.