Apple 2.0

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Analyst: iPhone nano "may not see light of day"

February 13, 2009: 11:14 AM ET

iPhone nano, shuffle

Apple has three new iPhone models in a "fairly advanced" state of development, according to Kaufman Bros.' Shaw Wu, including one with a 2.8-inch screen (the screen on the current iPhone measures 3.5-inches diagonally).

All three devices are just waiting for a green light from Apple (AAPL), according to Wu's sources among the company's Asian suppliers, and could be readied for launch in either the June or September quarter.

But in a report to clients issued Friday morning, Wu says that the smaller one -- the so-called iPhone nano -- is "less likely to see the light of day in the near term."

"It appears that software and thus feature sets will be the key differentiator (at least for the time being) as opposed to screen size, like with iPods and Macs," he writes.  "Most likely we will see continued use of the 3.5-inch form factor, at least until touchscreen technology becomes more advanced where it can be comfortable on different size screens."

What's holding up the new iPhones, Wu says, is not the technology but the marketing strategy. Like other analysts, Wu is hearing from his industry sources that the price of AT&T's (T) $70-plus service plan ($40 a month for voice + $30 for data) has become a "serious hurdle" for would-be customers -- especially in the current economic environment.

But that may be changing.

"What we are picking up is that AT&T, who was once not flexible on changing prices on its data plans, due to fear of lower profits, is more open to developing tiered data plans," he writes. "Our sources indicate that Apple, along with AT&T and its carrier partners, is in the midst of figuring out how to position a second and potentially even a third iPhone model that would be complementary and minimize cannibalization with the current 3G iPhone.

"What will likely happen are new data plans for lighter users and the heaviest users and different iPhone models with different feature sets. We have even heard of the possibility of a lower cost voice, e-mail, messaging only plan (without Internet) for a potential iPod phone."

iPhone Model No. A1303Helping fuel speculation about new-model iPhones was the appearance this week of leaked photographs purporting to represent an upcoming iPhone with a matte-black finish and a new model number: A1303. See The Mac Observer and MacRumors for more detail. The Mac Observer last year was the first to post leaked photos of what turned out to be the case of the iPhone 3G, but that's no guarantee that this one is real.

See also:

[Image of imaginary iPhone nano and shuffle reposted courtesy of Information Architects.]

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Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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