Development of an Apple smartphone began in 2004, when the company started to gather a team of 1,000 employees led by hardware engineer Tony Fadell, software engineer Scott Forstall, and design officer Jony Ive, to work on the highly confidential "Project Purple".
Then Apple CEO Steve Jobs steered the original focus away from a tablet (which was later revisited in the form of the iPad) towards a phone. Apple created the device during a secretive collaboration with Cingular Wireless (later renamed AT&T Mobility) at an estimated development cost of US$150 million over thirty months. According to Jobs in 1998, the "i" word in "iMac" (and thereafter "iPod", "iPhone" and "iPad") stands for internet, individual, instruct, inform, and inspire.
Apple rejected the "design by committee" approach that had yielded the Motorola ROKR E1, a largely unsuccessful "iTunes phone" made in collaboration with Motorola. Among other deficiencies, the ROKR E1's firmware limited storage to only 100 iTunes songs to avoid competing with Apple's iPod nano. Cingular gave Apple the liberty to develop the iPhone's hardware and software in-house, a rare practice at the time, and paid Apple a fraction of its monthly service revenue (until the iPhone 3G), in exchange for four years of exclusive U.S. sales, until 2011.
Jobs unveiled the first-generation iPhone to the public on January 9, 2007, at the Macworld 2007 convention at the Moscone Center in San Francisco. The iPhone incorporated a 3.5-inch multi-touch display with few hardware buttons, and ran the iPhone OS operating system with a touch-friendly interface, then marketed as a version of Mac OS X. It was the first mobile phone to use multi-touch technology. The device launched on June 29, 2007, at a starting price of US$499 in the United States, and required a two-year contract with AT&T. The price was reduced by a third after two months. The resulting complaints forced Jobs to issue an apology and offer a partial rebate to early purchasers of the Phone.
The iPod Touch, which came with an iPhone-style touchscreen to the iPod range, was also released later in 2007. On July 11, 2008, at Apple's Worldwide Developers Conference (WWDC) 2008, Apple announced the iPhone 3G, and expanded its launch-day availability to twenty-two countries, and it was eventually released in 70 countries and territories. The iPhone 3G introduced faster 3G connectivity, and a lower starting price of US$199 (with a two-year AT&T contract). It proved commercially popular, overtaking Motorola RAZR V3 as the best selling cell phone in the U.S. by the end of 2008. Its successor, the iPhone 3GS, was announced on June 8, 2009, at WWDC 2009, and introduced video recording functionality. The iPad followed in 2010.