NEW YORK: Apple 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. Kevin Chang, a JP Morgan analyst based in Taiwan, cited people in the supply channel he did not name and an application with the US Patent and Trademark office for his report dated July 8. 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. Apple spokeswoman Natalie Kerris declined comment. Long lines of people turned out on June 29 when U.S. sales began for the iPhone, a mobile phone with a music player and Web browser. Analysts have estimated that sales in the first weekend were as high as 700,000 units. Chang said a way to follow up the iPhone with a cheaper version would be to convert the Nano into a phone and price it at $300 or lower. The iPhone sells for $500 and $600, depending on storage space. “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,” he said noting that the new phone could have “rather limited functionality.” Another analyst Gene Munster of Piper Jaffray said he expects Apple to bring out iPods that resemble iPhone, which features such as a touch-sensitive screen, later this year. Such products would help stop iPhone eating into iPod sales. “We believe the iPhone reveals much of what the iPod will soon be,” Munster said in a note to clients, “iPods with some of the touchscreen features of the iPhone should lessen the impact of cannibalization.” Kerris also declined comment on Munster’s note Because of the anticipated lower price for the Nano-based phone, 2008 sales of 30 million to 40 million units “is achievable,” according to JP Morgan’s Chang.

Only a week after Apple launched its iPhone amid much hype, a hacker has claimed to have overcome restrictions by AT&T’s network activation that prevents unauthorised usage of the gadget as a Internet browsing and music device. Jon Johansen, 23, a prolific hacker of consumer electronics since his teenage days in Norway, has written in his post how he has “found a way to activate a brand new unactivated iPhone” without signing up for the AT&T service. “The iPhone does not have phone capability, but the iPod and Wi-Fi work. Stay tuned,” New Scientist quoted Johansen’s blog provocatively called ‘So Sue Me’ as saying. His blog also contains technical details for other hackers.

SAN JOSE: A consumer advocacy group has expressed outrage over Apple Inc’s battery replacement programme for the iPhone, while developers and hackers are trying to figure out ways they could expand the capabilities of the hot new gadget. The hybrid cell phone, iPod media player and wireless Web-browsing device launched with much fanfare on June 29. On the same day, the Foundation for Consumer and Taxpayer Rights fired off a letter to Apple and AT&T Inc., the cell phone’s exclusive carrier, complaining that customers were being left in the dark about the procedure and cost of replacing the gadget’s battery. The iPhone’s battery is apparently soldered on inside the device and cannot be swapped out by the owner like most other cell phones. Apple spokeswoman Jennifer Hakes said on Thursday the company posted the battery replacement details on its Web site last Friday after the product went on sale. Users would have to submit their iPhone to Apple for battery service. The service will cost users $79, plus $6.95 for shipping, and will take three business days. The procedure is similar to the one it has for the company’s best-selling iPod players, but because some users will not want to live without their cell phones, Apple is also offering a loaner iPhone for $29 while the gadget is under repair. Harvey Rosenfield, founder of the Santa Monica, Calif.-based consumer watchdog group that wrote the letter last week, contends the iPhone’s battery and repair costs should have been clearly disclosed earlier.