The increasing use of touch-screen technology on handheld gadgets is showing no signs of abating, with Apple's upcoming iPhone the most high-profile addition to the market. Swedish mobile phone manufacturer Neonode attempts to offer an alternative with its N2 mobile phone and, although not nearly as powerful as the iPhone, there are some pretty tidy features built in.

It's extremely small, with a black, hard-rubber case and minimal controls including a directional switch and power and volume on the side. The rest of the operation is controlled by the 2-inch optical touch-screen display, but rather than expecting users to utilise a stylus to poke at miniature controls, you'll find navigation works by using a series of sweeping motions on various parts of the screen to move around and open menus.

At first this is a rather tricky concept to grasp: there is a pretty steep learning curve here, but with a bit of practice you'll find yourself moving through menus pretty easily. To offer a few examples, the start menu and applications are accessed with an upwards sweep starting at the bottom left of the display. The bottom middle area opens a keyboard and bottom right opens the tools menu. You can accept commands by sweeping from left to right across the bottom, and cancel by moving right to left.

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Once you get used to these actions you'll find it fairly easy to access the various functions of the phone. It's fairly well featured and quite oriented towards multimedia use with a built-in 2-megapixel digital camera and a video and audio player that can utilise the built-in mono speaker. You'll find pretty good codec support here for video, and sound quality through the impressive in-ear bud phones is very good. Supplied with the device is a 1GB mini-SD card which can obviously be replaced with higher capacities, so you're fairly well off in terms of storage.

The N2 runs Windows CE 6.0, and to a certain extent its success will be built around the effectiveness of third-party applications developed to take advantage of the unique form of navigation. The potential capabilities of the N2 are therefore quite difficult to judge, but if you're considering it as a replacement for your regular mobile phone there are a few important things to bear in mind.

Putting aside the fact that you have to get used to a whole new form of menu structure and operation, the touch-screen functionality does have some considerable drawbacks over a regular keypad. Entering characters for text messages or phone numbers isn't as tricky as we initially expected due to the size of the keys and a vibrate notification that kicks in when a key is pressed, offering a pseudo-tactile response. It's still awkward though, and serial-texters are likely to become frustrated having to correct key-presses, plus it's quite easy to select the wrong menu item when browsing up and down lists.

Other drawbacks for conventional phone use are the fixed-focus camera and no EDGE or 3G support, but on the upside it's quad-band, supports MMS messaging and has Bluetooth built in. You'll also find you can (are you listening Mr Jobs?) cut and paste between applications using the clipboard and, although you'll only get about four hours of talk time, it's quoted to last around eight days on standby.

One notable feature is the streaming music recorder, which can stream audio and extract and save MP3s from sources such as digital music subscriptions services and online radio stations. This is a nice way to bulk up your audio collection or get some variety on the move, and is likely to become a big selling point of the device.

After carrying around the N2 for a good few days as a mobile phone replacement, we came to the following conclusions. When you get used to the navigation it's often quite a nice way to move around, but much of your everyday mobile phone operation, particularly writing text messages, can be very frustrating.

As a multimedia player it's fairly adept and it's certainly compact and stylish enough to succeed. However, considering an expected asking price (although keep your eye out for contract deals) it's a lot to pay for something that's not as usable or functional as most mobile phones or media players currently available. But it's an interesting hybrid and, although unlikely to be a genuine threat to the iPhone, it does at least offer some food for thought.

If the N2 has enough support from open source or third-party vendors it could well amass a bit of a cult following. It's a very niche product, though: the design and operation may appeal to some, but if you're looking to replace your mobile phone, don't expect the same level of operation.