Will a cheaper iPhone click before Christmas?

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One analyst believes Nano model may appear


If you’re holding out for a cheaper iPhone, your time may come before the end of the year, a stock analyst predicts.

Kevin Chang, a JPMorgan analyst in Taiwan who follows the Asian mobile phone industry, wrote in a research note this week that he believes Apple Inc. is developing an iPhone that could cost $300 or less. Citing a patent filed by Apple and a manufacturing source, Chang said the new iPhone could replace the popular Nano, a smaller, less-expensive version of the iPod digital media player.

But in a follow-up note, another JPMorgan analyst cautioned that expecting an iPhone Nano this year could be premature.

“A lower-end iPhone is inevitable, in our view, but we believe a near-term launch would be unusual and highly risky,” wrote Bill Shope, the JPMorgan analyst who covers Apple.

Marking Apple’s first step into the competitive but lucrative mobile phone business, the iPhone is forcing competitors to roll out better models. The product is also driving consumers to use their cell phones not just to make calls, but to listen to music, watch videos and surf the Internet.

The current iPhones, priced at $500 and $600 with a two-year subscription to cellular carrier AT&T, went on sale June 29 and have sold quickly.

But even before its premiere, enthusiasts and experts had been speculating about the iPhone’s next iteration. Many expect a new iPhone in time for the holidays, something that Apple has done before with iPods. Others cite a laundry list of improvements that could be incorporated in the next iPhone.

Shope said he expects the next iPhone to run on AT&T‘s fast 3G network. The iPhone now uses AT&T‘s slower Edge network to access the Web and check e-mail. The slow speed has been one of the chief complaints about the iPhone.

Chang suggested in his note that Apple would introduce a cheaper iPhone using the iPod’s scroll wheel instead of the current iPhone touch-screen interface. He predicted consumers might see the product as soon as the October-to-December holiday shopping season.

A Gartner report two weeks ago urged Apple to roll out a cheaper version of the iPhone in the next nine months, based on how quickly Apple and the mobile phone industry generally move to update products.

But Mike McGuire, a Gartner analyst and one of the authors of the report, said he has doubts about an iPhone Nano.

“The click wheel doesn’t make sense,” he said. “Why go back to something like that if you’ve created a new touch-screen interface?”

At the same time, he added that he wouldn’t be surprised if Apple is working on a new version of the iPhone. “I don’t underestimate that company and I’ve given up trying to handicap them,” he said.

Apple spokeswoman Natalie Kerris said the company doesn’t comment on speculation.

Many consumers would welcome a cheaper iPhone. One of the complaints has been the product’s price.

Added to that is a $79 fee plus a $6.95 shipping charge to replace the iPhone battery once it dies. The advocacy group Foundation for Taxpayer and Consumer Rights recently sent a letter to Apple complaining about the company’s failure to disclose that additional cost when it released the phone.

What’s more, consumers who want to stay in touch while their battery is being replaced will have to pay $29 to rent a temporary iPhone, said Harvey Rosenfield, the foundation’s founder.

“In about a year or so when the battery begins to fail, there are going to be a lot of angry customers,” he said. Apple “should have discussed this when they started selling it.”

Kerris said Apple did disclose battery replacement costs when the iPhone hit stores June 29.

Consumer Watchdog
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