While Snopes.com does flag this as a true item, I disagree with their assessment.
I've read multiple versions of it, and there's a discrepancy as to the date of the alleged raid in Amsterdam.
Additionally, the story states:
"The guns are loaded by twisting the phone in half. The .22-caliber rounds fit into the top of the phone under the screen. The lower half, under the keyboard, holds the firing pins. The bullets fire through the antenna by pressing the keypad from numbers five to eight."
The photo of a "cell phone gun" accompanying the article simply won't work in the manner described. Given that 4 .22 rounds are loaded in the individual chambers pictured, they each must, of necessity, fire straight forward, through the top of the phone, not "through the antenna". There is no feed mechanism to reposition & align each round with the antenna.
The Germans in WWII had a belt-buckle gun that sprang forward from a large buckle, and was capable of firing 4 shots; each was an individual barrel & firing mechanism, & the gun had to practically be disassembled to reload. I believe anyone with a passing familiarity with firearms would agree.
When this story first appeared some years back, there was even a video supposedly showing one being fired--except it wasn't the same one described & pictured in the article.
While it's probably within the realm of possibility to create such a device, or something similar (rumour has it the Israeli Mossad used a working cell phone built with plastic explosive to kill a terrorist leader), from the evidence presented, it appears to me to be the stuff of James Bond, & an urban legend.
David