Apple has three new iPhone models in a "fairly advanced" state of development, according to Kaufman Bros.' Shaw Wu, including one with a 2.8-inch screen (the screen on the current iPhone measures 3.5-inches diagonally).

All three devices are just waiting for a green light from Apple (AAPL), according to Wu's sources among the company's Asian suppliers, and could be readied for launch in either the June or September quarter.

But in a report to clients issued Friday morning, Wu says that the smaller one — the so-called iPhone nano — is "less likely to see the light of day in the near term."

"It appears that software and thus feature sets will be the key differentiator (at least for the time being) as opposed to screen size, like with iPods and Macs," he writes.  "Most likely we will see continued use of the 3.5-inch form factor, at least until touchscreen technology becomes more advanced where it can be comfortable on different size screens."

What's holding up the new iPhones, Wu says, is not the technology but the marketing strategy. Like other analysts, Wu is hearing from his industry sources that the price of AT&T's (T) $70-plus service plan ($40 a month for voice + $30 for data) has become a "serious hurdle" for would-be customers — especially in the current economic environment.

But that may be changing.

"What we are picking up is that AT&T, who was once not flexible on changing prices on its data plans, due to fear of lower profits, is more open to developing tiered data plans," he writes. "Our sources indicate that Apple, along with AT&T and its carrier partners, is in the midst of figuring out how to position a second and potentially even a third iPhone model that would be complementary and minimize cannibalization with the current 3G iPhone.

"What will likely happen are new data plans for lighter users and the heaviest users and different iPhone models with different feature sets. We have even heard of the possibility of a lower cost voice, e-mail, messaging only plan (without Internet) for a potential iPod phone."

Helping fuel speculation about new-model iPhones was the appearance this week of leaked photographs purporting to represent an upcoming iPhone with a matte-black finish and a new model number: A1303. See The Mac Observer and MacRumors for more detail. The Mac Observer last year was the first to post leaked photos of what turned out to be the case of the iPhone 3G, but that's no guarantee that this one is real.

See also:

• iPhone nano: A rumor before its time
• The great iPod migration

[Image of imaginary iPhone nano and shuffle reposted courtesy of Information Architects.]

How will Apple (AAPL) persuade 100 million iPod users to trade up to an iPhone? That's the problem Bernstein Research's Toni Sacconaghi tackles in a report to clients Wednesday.

His answer: Make an iPhone that comes without a data plan — currently $30 a month in the United States.

The opportunity for Apple is so attractive that he puts the odds of such a thing coming to market before the end of the year at better than 50-50.

Sacconaghi's premise is that the market for stand-alone music players is shrinking and will continue to decline over time — eventually going the way of the Palm Pilot — as users trade their iPods in for cell phones that can also play music.

For the vast majority of those iPod users, the iPhone is simply too expensive — not because of the $199 starting price, but because of the required voice + data service plan ($70+ per month, or roughly $1,700 over the life of a two-year contract) that Sacconaghi describes as "the biggest gating factor to mass market adoption."

The numbers involved are huge. The worldwide market for smartphones (i.e. phones that require a data plan) is estimated to be about 225 million in 2009. But that's just 17% of the total 1.35 billion mobile handset market. (See Exhibit 1.) In other words, Apple is effectively not participating in 83% of the mobile handset market place.

The irony, Sacconaghi contends, is that Apple is in a unique position to grab a hefty slice of that pie.

"Apple's more than 100 million iPod users give the company a huge opportunity to capture significant market share in the mobile device market, if it can successfully migrate these users to the iPhone. We note that these users would likely be very partial to migrating to an Apple offering, given their familiarity with iTunes and purchases of DRM encoded content."

So what would an iPhone without a data plan look like?

Apple, as usual, isn't talking about future product plans, and "the blogosphere," says Sacconaghi, "also appears to have little credible insight."

But the two solutions he proposes — an "iPhone nano" and an "iPhone touch" — are not that different from the ideas the rumor sites have been kicking around for months.

• iPhone nano: A miniature iPhone that plays music and videos, but has a small screen and can't browse the Net or run iPhone apps. $100, with subsidy.
• iPhone touch: Today's iPod touch with a cellular modem. Can make calls and play apps, but may not have 3G or a GPS. $150, with subsidy.

Sacconaghi is convinced either one of these approaches would enable Apple to capture 3% of the non-smartphone mobile handset market (compared with its current 12-15% of the smartphone market). Even assuming 100% iPod cannibalization, Apple makes out like a bandit, according to Sacconaghi:

"[For] every iPhone nano sale, Apple essentially trades about $125 in revenues (assumed wholesale price) for $250, and $44 in gross profits for $130. For the iPhone Touch, Apple would be trading about $200 in revenues for $350, and $70 in gross profits for $150."

It's all laid out in the Bernstein Research spreadsheet (Exhibit 3) pasted below the fold.

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If it was Steve Jobs' intention to take the wind out of Macworld's sails, he's done a pretty good job.

"Expectations are low," wrote Piper Jaffray's Gene Munster in a note to clients early Tuesday, one week before the first Macworld Expo keynote since 1997 that won't be delivered by Apple's charismatic CEO.  "No significant new products are expected."

"Fairly modest" is how Kaufmann Bros.' Shaw Wu described investor expectations for the Expo, which runs from Jan. 5 – 9 in San Francisco and which Apple (AAPL) has already announced will be its last. "Frankly, we would be a little surprised if there is a major announcement, as we believe it would make better sense for Steve Jobs to do so himself at an AAPL event."

Behind Steve Jobs' Macworld exit

Both Wu and Munster are looking for Jobs' keynote stand-in — senior vice-president Phil Schiller — to introduce updated iMacs and redesigned Mac minis — hardly surprises given that both machines are overdue for a refresh.

Munster has not given up on the "new form factor iPhone" — a.k.a. iPhone nano — that he once thought would be announced at the January event. Now he doesn't expect it to arrive before the end of Apple's second fiscal quarter, which closes in March.

And he is sticking with his famous prediction — the most optimistic of any mainstream analyst — that Apple will sell 45 million iPhones in calendar 2009. But he reminds clients that that figure is predicated on his belief that Apple will enlarge its iPhone offerings, vastly expand its retail outlets and significantly lower its prices. So far it's only done one of the three.

Wal-Mart to sell iPhone starting Sunday

Shaw Wu also sees "strong indications" of a lower-cost iPhone and other "larger form factor touchscreen devices" — a.k.a. iPod tablet — later in the year. His sources hint that Apple may introduce a new "consumer device" next week — possibly a jazzed up Apple TV or a superconnected Time Capsule — a.k.a. home server — that would let you grab your files or do backups from anywhere on the Internet.

And Wu hasn't ruled out the possibility that Phil Schiller will surprise everyone next week with a breakthrough product that nobody is expecting, if only to send the message that Apple is a "much broader and deeper company than one person, even if he/she is a living legend."

For our part, we haven't given up on the possibility that Steve Jobs will make a surprise cameo appearance during Schiller's keynote, if only to show that he's still kicking — Gizmodo's latest rumor to the contrary — and still very much in charge.

Is Steve Jobs preparing to launch a smaller, cheaper version of the iPhone in time for Christmas?

That's the rumor — based on a brief item in London's Daily Mail — that had Apple watchers buzzing over the weekend. "Report: iPhone nano to ring in the holidays" read the headline on Crave, CNet's gadget blog. "iPhone Nano Rumor Brings Hope Alive," wrote iPhone Savior. "Holy rumor, Batman," shouted Crunch Gear, "iPhone nano to be released by Christmas."

The idea that Apple (AAPL) might eventually introduce a family of iPhones of different sizes that sell at different prices is hardly new. A rumor that an iPhone nano would be launched before Christmas 2007 was making the rounds just over a year ago (see, for example, MacRumor here).

But the timing was wrong last summer and, according to Piper Jaffray's Gene Munster, this summer's rumor is also a bit off.

"Just as the company slowly diversified the iPod lineup and entered lower price points with every new version," wrote Piper Jaffray's Gene Munster in May, "we expect Apple to launch new models of the iPhone at lower price points in calendar year 2009."

Julian Ivan-Alexander, a London-based investor who moderates The Mac Observer's Apple Finance Board, expects Apple to eventually launch three or four variations on the iPhone. Writing under the byline Tommo_UK, he led a spirited discussion of the pros and cons of an iPhone nano on AFB last summer. Reaction there over the weekend to the new rumor was largely skeptical. Although an iPhone that retailed for say, $99, would break open the market to a huge block of new customers, Apple has no reason to sell one as long as people are still lining up to buy a $199 model that Apple can't turn out fast enough to meet demand.

"This rumour still doesn't make any sense to me for this year," wrote a British investor who calls himself sleepygeek. "Taking features out of the current iPhone loses $10 or more of revenue for every $1 saved in build costs. iPhone Nano would have to outsell iPhone by a large factor (5 -10 times the sales) to make sense." (link)

The Daily Mail item suggests that the new phone will be available in British shops by Christmas for 150 pounds (just under $300). It doesn't offer any supporting evidence beyond an unnamed "industry source" who is quoted saying that "a cut down version [of the original iPhone], with the candy bar shape of iPod nano music players, would be a huge hit as a Christmas gift." (link)

The London tabloid, which is better known for celebrity gossip than technology reporting, also cites an "expert" who suggests the nano phone would have a touch wheel on the back and a display on the front so that numbers would be dialed from behind. Apple filed a patent last year for a device that resembles this, but nothing came of it.

One wag on AFB suggests that Apple might also introduce a "shuffle" version of the iPhone. It would clip to your lapel and dial phone numbers randomly.

How would that work? See the (tongue in cheek) video below the fold.

[Image of imaginary iPhone nano and shuffle reposted courtesy of Information Architects.]

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