Apple plans cheaper, Nano-based phone

Apple Inc. plans to launch a cheaper version of the iPhone in the fourth quarter that could be based on the ultra-slim iPod Nano music player, according to a JP Morgan report from July 8.

"We believe that the 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," said Kevin Chang, a JP Morgan analyst based in Taiwan.

Apple filed a patent application document dated July 5 that refers to a multifunctional handheld device with a circular touch pad control, similar to the Nano's scroll wheel.

"We believe the iPhone reveals much of what the iPod will soon be," said another analyst Gene Munster of Piper Jaffray in a note to clients, "iPods with some of the touchscreen features of the iPhone should lessen the impact of cannibalization."

Analysts forecast that a cheaper phone from Apple, which leads the digital music player market, could pose a much bigger threat to long-established phone makers such as Nokia , Motorola Inc, Samsung Electronics Co Ltd and Sony Ericsson, owned by Sony Corp and Ericsson.

Yet, Apple spokeswoman Natalie Kerris still declines comment.