Apple Reportedly Developing Smaller, Less Expensive iPhone

Apple Inc. (NASDAQ:AAPL) is reportedly working on a smaller, less costly prototype of its popular smartphone, the iPhone, according to reports.

The consumer-tech giant has devised a prototype that is about one-third smaller than the latest  iPhone 4, Bloomberg News reported on Thursday, citing a person who saw the new device last year.

The company is mulling the possible sale of a new, smaller iPhone at a price point of $200; which wouldn't require consumers sign a two-year wireless contract, according to Bloomberg. The report also cited two people who said the company is working on making it easier for the phone to be used on various wireless networks.

The iPhone, which has enjoyed considerable popularity with consumers in the U.S. has been slow to find adoption in the overseas markets, as both the phone and the data plan have a high price point.

“This would suggest that Apple gets that eventually they’re going to need to add a line of products below the iPhone so they can make sure that no one can just come in beneath them and grab market share,” said Rob Enderle, principal analyst for the Enderle Group.

Enderle explained that Wednesday’s announcement of the Veer, which is a smaller smart phone from HP, could indicate that there is a market for a smaller phone, possibly with cheaper data plan. A smaller version of the iPhone would target that market.

Apple did not respond to calls for comment.

Shares of Apple were up $2.71, about 1.00% higher, in afternoon trading on the Nasdaq, Friday.