Canon’s (soon to be updated) IXUS 65 established itself as a near-perfect compact camera, but a new generation of compacts is nipping at its heels. The TZ3 is larger and significantly more expensive, but offers some very tempting features.

First off is the super-sharp, 10x Leica lens with a (35mm equivalent) focal length of 28 - 280mm. We put this through its paces by snapping jumping motorbikes from the stands at the Easter Show during the day, and taking concert pictures from opposing ends of the Acer Arena at night. Daylight images were impressively sharp and approached SLR quality and sharpness. The 7.2-megapixel sensor suffers only minor grain allowing judicious cropping too. We were also impressed with the low-light, concert photographs, which remained sharp, with accurate colours. At wide angle there was very little barrel distortion and chromatic aberrations were absent in bright, low contrast environments.

However, focus times at high magnifications could be infuriatingly long: it regularly took a couple of seconds to lock on, meaning our picture had long gone. But you do get used to such foibles and can compensate to lessen the impact.

Shooting at full telephoto would not be possible without the integral optical image stabiliser (OIS) – another benefit over the IXUS. This has two modes: MEGA OIS compensates primarily for handshake by measuring 4000 frames per second to eliminate hand shaking. This also helps with Macro shots and shooting in dark rooms without flash and, we found, allows sharp, handheld, flashless photos down to 1/20th of a second. ISO control (IIC) automatically adjusts ISO and shutter speed to help with adjustments for subject motion.

The size of the lens means that depth of field can be impressive, though you can’t take full advantage of this due to the lack of manual exposure settings. ISO goes all the way to 1250 but the excessive grain enormously affects sharpness. We judged ISO 800 the maximum useable setting. Video mode records near-DVD quality Quicktime video at up to 848 x 480 pixels (16:9) and 30fps. Usefully, a JPEG image of the first frame is recorded too, so that you can easily see what’s on that video. However, sound is a little muffled and focus and zooming are fixed while filming, so be sure to focus before shooting.

More features are packed in, including 21 preset modes and travel date stamping, and it’s all intuitive and easy to find, thanks to the control dial at the top and shortcut buttons at the back. The latter allow quick flash adjustment, exposure compensation and timer. The 3in LCD is clear, responsive and sharp as well, meaning that you won’t miss a viewfinder.

Our main gripe is battery life. It will take some 250 shots without OIS turned on, but you must use it judiciously as, on heavy usage days, the small battery frequently ran out well shy of this figure.

But these are foibles you can live with. It takes great pictures, and while it’s bulkier than an IXUS 65 the superior lens, magnification and image stabiliser make it a great alternative.