Apple planning iPhone Nano: JP Morgan report

Apple Inc. is planning to introduce a cheaper, smaller version of its iPhone smartphone, according to a report from financial services firm JPMorgan.

Kevin Chang, an analyst at JP Morgan in Taiwan, said he believes that the iPod/Mac maker will release a new entry-level phone that would be based on the ultra-slim iPod Nano music player.

To prepare his report, Chang cited some people "in the supply chain" and took a look at a recent Apple application submitted with the US Patent and Trademark office. According to Chang, Apple’s patent filings dated 5 July refers to a multifunctional gadget with a circular touch pad control, similar to the Nano's scroll wheel.

"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 told Reuters.

To be priced at US$300, the iPhone Nano, a cheaper version of the iPhone with limited functionality, and lacking the multifunctional mobile phone’s distinctive capacitive touch screen, will likely hit the markets in the fourth quarter of this year, according to the report published Monday by Reuters.

Apple spokeswoman Natalie Kerris has declined to comment on the issue.

Apple’s iPhone, which was touted as "revolutionary" by Steve Jobs in the keynote speech in January at the Macworld conference, went on sale on June 29 at Apple and AT&T stores as well as company's Web site. As per market analysts’ estimates, sales of the iPhone in the first weekend were as high as 700,000 units.

But, the high price of the iPhone could limit its sales to a small percentage of the market, especially in the United States where most of consumers tend to spend $100 or less on mobile phones.

Apple’s iPhone is priced at $499 for 4-gigabyte model and $599 for an 8-gigabyte model.

Though Apple is a new player in the cellphone world, it can pose a real threat to long-established phone makers such as Nokia, Motorola, Samsung and Sony Ericsson if it launches low-cost iPhone Nano.