Larger Apple multi-touch devices move beyond prototype stage

"We believe there is a 50% chance that a new form factor will be introduced, marking Apple's entrance into the emerging "MID" or mobile internet device market," American Technology Research analyst Shaw Wu wrote in a report to clients Thursday. "Our sources indicate 4-inch and 7-inch touchscreen devices beyond prototype stage that are a cross between a Mac and iPod touch."

It's believed the analyst is referring to a long-running skunkworks project at Cupertino-based electronics maker, first reported by AppleInsider last September, aimed at producing a more capable, modern day reincarnation of its Newton MessagePad that will also dual as an Internet tablet and more.

Still, Wu hedges his bets somewhat on an introduction at next week's Apple Worldwide Developers Conference, explaining that "exact timing of production isn't clear." He added, however, that he believes "it is inevitable that Apple will bring more touchscreen devices to market" that will further leverage its trademark multi-touch technology first introduced on the iPhone.

More certain is the analyst on Apple's iPhone-related announcements for the conference. He said supply chain sources indicate at least two new models of the touch-screen handset will make an appearance, including a much anticipated version that will run on so-called 3G networks for $399 to $499, in addition to a revised 2.5G version that will sell for $50 to $100 less than today's $399 introductory price.

"Our sense is that Apple is more focused on driving volume compared to a year ago, raising the possibility of carrier subsidies as likely," the analyst told clients. "In terms of features, we are picking up on an improved virtual keyboard with haptics giving it a more tactile feel, GPS and improved location services, and thinner and lighter casing that is more durable and inexpensive to produce."

Wu defended his belief that Apple will continue to market a 2.5G iPhone by noting that 3G coverage is still relatively small and concentrated globally compared to 2.5G technology. In many parts of the world such as Latin and South America where the iPhone has potential with a high number of subscribers, "having just a 3G version to offer doesn't make much technical and economic sense," he said. "The components in a 3G phone are more expensive, not to mention consume more battery power and generate more heat."

The AmTech analyst also told clients that while WWDC has traditionally been a forum for Apple to introduce new Mac systems, that's unlikely to be the case this year due to a conflict in deployment schedules.

"While we believe it makes logical sense for Apple to introduce new Macs at WWDC, our sources indicate radically refreshed portable Macs most likely won't be ready for volume production until the September quarter," he explained. "We believe we could end up with a 'special event' in calendar quarter three to announce these new Macs."

Wu advised Apple investors that shares of the company are often volatile around keynotes by chief executive Steve Jobs, like the one set for Monday, but nevertheless reiterated his Buy rating and $220 price target.

"With new products widely anticipated, we do not have a good feel for how the stock will trade on new product announcements, which are sometimes 'sell the news' events," he wrote. "We would take advantage of weakness to add to positions."