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A More Petite iPhone by Christmas?

iPhone

UPDATED: A $99 iPhone before the New Year?

The nation's top retailer, Walmart, is officially tight-lipped about the buzz that its shelves could be hosting a $99 4GB iPhone by the end of the month. But mobile device experts have plenty to say, and it's all good.

Published reports in the New York Post and Mercury News quoted Walmart employees at various stores nationwide claiming that a 4GB iPhone will arrive before December 30th. One report said Walmart was attempting a pre-Christmas launch.

Spokesperson Ashley Hardi told InternetNews.com today that "at this time Walmart has no official announcement regarding an iPhone for sale." Apple, which did not comment on this story, sells the iPhone through exclusive carrier AT&T, its own retail site and electronics retailer Best Buy. AT&T did not respond to inquiries by press time.

The news reports hit as Apple's iPhone continues to take the smartphone and mobile device industry by storm, grabbing marketshare with each quarter, and pushing data revenue streams into AT&T's ledgers.

If the stories pan out, the smaller storage version of the iPhone could also be a way for Apple to boost its iPod market share, which is starting to slide. The music device is viewed as the gateway product into Apple's computing device portfolio, according to a recent industry report from Pipe Jaffray, and its declining growth is a concern.

Analysts said a smaller device would fit nicely into the current iPhone portfolio. Apple now sells 8GB and 16GB iPhone devices for $199 and $299 respectively.

"This would mean only more business for AT&T," Ken Dulaney, VP of mobile and wireless for Gartner, told InternetNews.com. "All the carriers use retail suppliers to expand their channel and keep down costs. This is not AT&T competing with Walmart," Dulaney said.

That's because Apple, AT&T and Walmart would all make money, according to analysts.

AT&T's data services revenues are so strong, even after device subsidies, they can afford to pay part of the iPhone activation fee to Walmart for channel access, said analysts. The basic iPhone required two-year data plan starts about $40 a month.

"Forget about the up front price [the $99 price]," said Dulaney. "The money is made on the service and the likely renewal after that," said Dulaney.

Apple would see increased revenue in applications and music through its iTunes and App storefronts.

"A competitive product offering at $99 would greatly expand Apple's market share and compete with BlackBerry, Samsung, Motorola and others," Jack Gold, senior analyst for J.Gold Associates, told InternetNews.com.

"Even those users who would buy an iPhone only to use the music functions and not get an data plan would be ok for Apple as it expands its music sales efforts and gets the users to upgrade – something fewer and fewer of its iPod users are doing these days," noted Gold. " So either way they could win."

For the third quarter of this year Apple sold 6.9 million iPhones, more than the 6.1 million total it sold of the first generation iPhone which was on the market for over a year.

In his recent research note Piper Jaffray senior analyst Gene Munster predicted the iPhone, which accounted for 5.7 percent of total company sales this year, will own 18.4 percent in 2009. Apple's iPhone will represent nearly 20 percent of the PC maker's overall product sales next year, according to the firm.

Update corrects iPhone's current and rumored capacities.