New York – Apple (NASD:  AAPL) is developing a new smaller, less-expensive
iPhone, and mulling transforming its MobileMe digital backup service into an
online locker service for users’ songs, movies, TV episodes and e-books, The
Wall Street Journal reported, citing sources. One source who saw a prototype of
the new iPhone said it is about half the size of the iPhone 4; the device is
expected to sell for about half the cost of existing models.

Sources also tell
The Journal that Apple is exploring a new focus for MobileMe, its $99-per-year online
storage service for users’ email, calendars and contacts.

The company may do
away with that fee, and begin allowing users to store their photos, music,
videos and e-books on MobileMe.

The new budget iPhone and revamped MobileMe are
said to be “among the top priorities of Apple Chief Executive Steve
Jobs,” and are tentatively intended for release this summer, a source told
The Journal.



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