Steve Jobs, Apple Computer Inc. chief executive officer, holds the new iPhone in San Francisco, California, on January 9. - Reuters

Apple Inc. yesterday said the company was cutting the price of its iPhone and was on track to sell one million phones before the end of September.

"We want to make the iPhone even more affordable,"Jobs said at a product event, announcing that the price of the model with eight gigabytes of storage was cut to US$399 from US$599.

Jobs also unveiled an iPod with a touch screen that can browse the Internet wirelessly, fighting to maintain the digital media lead at a time when the company faces renewed attacks from rivals.

Jobs, who also showed off an iPod nano with a video screen, said the company plans to refresh its entire line of music players.

In addition, Apple's iTunes web music store will begin selling songs over wireless connections, he said.

Shares dropped about two per cent as Jobs continued to introduce new products at an event in San Francisco, California.

"Buy the anticipation and sell the reality. I guess investors were anticipating something more positive from Apple," said Paul Foster, options strategist at web information site theflyonthewall.com in Chicago.

The new touch-screen iPod will have many of the features of Apple's hit iPhone, including a touch screen, the ability to connect to the Internet wirelessly using Wi-Fi technology, and a mini web browser.

"We've built in Wi-Fi and we've made it usable," Jobs said, in what could be seen as a dig at Microsoft Corp's Zune music player, which beat the iPod to market with Wi-Fi, but has not enjoyed the iPod's popularity.

Apple will also update its iTunes online music store to let customers turn songs into ringtones for the iPhone and to allow customers to buy songs while connected wirelessly.

- Reuters