Apple Computer introduced a phone that runs its iTunes music software and a new music player dubbed the iPod nano that is the size of a business card.

The company also is adding a collectible version of the iPod based on the “Harry Potter” novels and will sell songs from singer Madonna through its iTunes store, the company’s chief executive, Steve Jobs, said at an event in San Francisco yesterday that featured appearances by Madonna and hip-hop artist Kanye West.

Mr. Jobs wants fresh products such as the silver iTunes phone, built by Motorola, and new designs such as the nano to parlay demand for the iPod into new areas and to expand sales from iTunes. That may bolster Cupertino, Calif.-based Apple’s sales in the holiday-shopping season next quarter, analysts said. Apple, which made its name selling Macintosh computers, derives more than a third of its sales from iPod and iTunes products.

The nano “is a dramatically different iPod,” a Piper Jaffray analyst, Gene Munster, said in an interview at the event.

“It’s not only going to bring new people into the market, but it will start a replacement cycle among iPod owners. Everyone is going to want one.”

The nano replaces the iPod mini and costs as little as $199, Mr. Jobs said yesterday. Mr. Munster said he may increase his estimate for 8.5 million iPods to be sold in the quarter ending in December.

Shares of Apple fell 12 cents to $48.68 in Nasdaq Stock Market composite trading. They have surged 51% this year after tripling in 2004. Motorola fell 5 cents to $22.36 in New York Stock Exchange composite trading and has gained 30% this year. Shares of Portal Player, which makes the chips that run iPods, surged 8.5% to $28.53, their highest level this year.

Apple’s nano, available in white or black starting tomorrow, weighs 1.5 ounces and has a 14-hour rechargeable battery, Mr. Jobs said. The player is 80% smaller than the original white iPods that came out in October 2001 and about a third of the size of the mini, which has been the most popular iPod model, the head of the iPod division, Jonathan Rubinstein, said in an interview.

The nano’s compact package is possible because Apple switched to smaller flash-based storage instead of the hard disk drives used in the mini, Mr. Rubinstein said. A 2-gigabyte version sells for $199; a 4-gigabyte version, which can store up to 1,000 songs or up to 25,000 color photographs, is $249.

“The nano is pretty sharp looking,” Jim Grossman, who helps manage $63 billion including Apple shares at Thrivent Financial, said. “It’s going to be a big deal.”

Mr. Grossman, who said he was online buying one already, praised the longer-lasting battery and new color screen. The color display and ability to store photographs was only available on Apple’s pricier iPods before.

Apple sells 1.8 million songs a day through the iTunes store and has a catalog of 2 million titles, up from about 200,000 when the store was opened in April 2003, Mr. Jobs said yesterday. The company has sold more than 500 million songs and has more than 10 million iTunes account holders, who have bought on average 60 songs, Mr. Jobs said. iTunes sells songs for 99 cents each in America.

Mr. Jobs, 50, clad in his trademark jeans and black turtleneck, turned again to music celebrities to help tout Apple’s music products. In October, the company began offering a special edition version of the player with rock band U2. Mr. West sang two songs.

Madonna is making the content of her 15 albums available through iTunes, Mr. Jobs said. He then called the singer for a video chat from London.

“I got tired of not being able to download my own music,” Madonna said. When Mr. Jobs asked her if she owned an iPod, she said, “Of course I do – that’s so duh.”

Madonna said she owned multiple players. “Every time I get a new one, a new one comes out the next week,” Madonna said.