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Monday, July 09, 2007, 04:45 pm PT (07:45 pm ET)

Analyst claims iPhone nano on track for fourth quarter

A researcher from JP Morgan believes that Apple is already on the verge of releasing a second, lower-cost iPhone model based on its most popular iPod.

Pointing to alleged, unnamed sources within the supply chain near his Taiwan office, analyst Kevin Chang suggests in a new report that Apple is gearing up for the release of a cheaper iPhone in the fourth quarter of 2007 that could use the iPod nano as its foundation to trim costs. A distinct possibility for Apple, Chang guesses, would be to simply gut the smaller iPod and price a version adapted for phone use at $300 or less.

"We believe that iPod Nano will be converted into a phone because it's probably the only way for Apple to launch a lower end phone without severely cannibalizing iPod Nano," Chang says in the report.

The prediction also refers to Apple's recent click wheel phone patent as proof of the technical backing for such a concept. The result would be "limited" in features but would be feasible with the approach described in the US Patent and Trademark Office filing, he says.

Such a price drop would also boast a far greater potential for sales in 2008 than the 10 million Apple chief Steve Jobs announced in January of this year. Sales of between 30 and 40 million are "achievable"if Apple has a less expensive iPhone ready in time, Chang adds.

The method described in the July 5th claim refers to a converted click wheel that adjusts its functions based on context, such as reverting from the traditional circular scrolling motions to tapping out phone numbers on different sections of the wheel during the calling process. No touchscreen is included or mentioned in this design, which to date remains only a concept.

Apple representative Natalie Kerris has declined comment on the issue, refusing to either confirm or deny the report. The company in the past has typically stated that it does not comment on rumors or unannounced products.