Analyst: iPhone nano in the Works

| Apple Stock Watch

Apple may already be working on a smaller sibling for its iPhone, and we could see it as early as Appleis fourth quarter, according to JP Morgan analyst Kevin Chang. Reuters reports that this smaller and less expensive and limited-function iPhone could be based on the popular iPod nano.

"We believe that iPod nano will be converted into a phone because itis probably the only way for Apple to launch a lower end phone without severely cannibalizing iPod nano," Mr. Chang said.

His information comes from unnamed sources in the Taiwan parts supply channel.

Mr. Chang expects that if Apple is developing an iPod nano-based cell phone, it will come in at US$299 instead of the $499 and $599 price points of the iPhone. If so, he predicts that Apple could sell somewhere between 30 million and 40 million units in 2008. In comparison, Apple plans to sell about 10 million of its recently released iPhone in 2008.

While an iPhone nano could help Apple grab more of the cell phone market without impacting current iPod nano sales, it could have the unwanted side effect of cannibalizing iPhone sales.

Since Mr. Changis information is based on unnamed sources and canit be verified, weill have to assume that -- at least for now -- the iPhone and iPod nano are safe.

Apple stock is currently trading in the pre-market at $130.21, down 0.12 (0.09%).

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