Apple saw $2.07 billion (£1.3 billion) wiped off its share price after disappointing markets with the release of the iPhone 4S on Tuesday. Analysts and consumers had been hoping that the company would be unveiling the next iteration in its handset series, the iPhone 5.

At one stage its shares, which had been trading up one per cent ahead of the announcement, fell a full four per cent, before recovering to close down 0.56 per cent. Analysts were quick to say that the initial sell-off was overdone.

Ahead of the press conference in Apple’s California headquarters, the buzz on blogs, social media and in the market was that the company would come to market with a new contender in a smartphone industry that has seen lower-priced competitors using Google’s Android operating system take market share from the iPhone.

The iPhone 4S, which has the same outward appearance as the old iPhone 4, features a new “personal assistant” which responds to voice commands, as well as a more powerful processor and an improved camera. However, the main focus of the launch was on price, with older models now set to be offered free or at heavy discounts with new contracts, as Apple attempts to claw back market share from its cheaper competitors.

The device goes on sale in major markets, including the UK, on October 14.