American Technology Research analyst Shaw Wu on Monday issued a report detailing his belief that Apple is working on a second iTunes cell phone, as well as his thoughts on sales of the new red iPod nano. Of the second cell phone, he wrote: "We are picking up that AAPL is working on a second in-house iTunes cell phone that will also feature imessagingi capabilities. We believe it will focus initially on mobile IM as opposed to e-mail. From our understanding, it will leverage off existing iChat software that runs on MacsWe believe this product is AAPLis ismart phonei and could be branded as iiChat mobile.i"

As for Appleis first iTunes cell phone, which has yet to see the light of day, Mr. Wu said that he "remain[s] uncertain on the exact timing ... We believe its igo-to-marketi strategy continues to be the gating factor (MVNO [mobile virtual network operator] vs. traditional carrier or both). However, we believe we are closer to resolution and our conviction remains high that AAPLis first cell phone will be released in 2007 -- potentially 1H07."

Apple had also been long-rumored to be preparing to join U2 front-man Bonois Project RED, which benefits AIDS research. The company finally signed up to the cause with the release last month of red 4GB and 8GB iPod nanos. Mr. Wu said that his sources indicate that the new MP3 players "are selling well." He currently expects Apple to sell 14 million iPods this quarter, "but given RED nano momentum, we believe our forecast will likely turn out conservative."

Looking beyond December, the analyst explained: "While AAPL shares have appreciated significantly in recent months, we continue to believe shares still have sizable upside ahead of MacWorld Expo in January 2007. We see several catalysts over the next few quarters including: Mac OS X Leopard in 1H07 that should help maintain strong Mac momentum, iTV launch in 1Q07, movie content partners beyond Disney, new iPod features including widescreen and wireless Bluetooth capability, and cell phones in 2007."

Mr. Wu reiterated his "Buy" rating on Appleis stock, with a US$92 price target. At 1:47 PM EST on Monday, the companyis shares were selling for $86.62, up 0.9% for the day.

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