Rumors of an iPhone Nano Continue: Smaller, Cheaper, No Memory?

There have been a number of published rumors in the last week, including those in Bloomberg and The Wall Street Journal that Apple plans to launch a smaller, more affordable iPhone – an iPhone Nano, if you will. According to yesterday’s story in the Wall Street Journal, the new iPhone – codename N97 – will be available some time this year for about half the cost of the current iPhone 4.

That story also also contends that Apple will be revamping its cloud-based storage service MobileMe. Currently MobileMe allows users to store their data online and sync their calendars and contacts among their various computing devices. The WSJ suggests that Apple will do away with its $99 annual subscription fee, making MobileMe a free service “that would serve as a ‘locker’ for personal memorabilia such as photos, music and videos, eliminating the need for devices to carry a lot of memory, the people familiar with the situation said.”

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The Apple-focused blog Cult of Mac has its own thoughts on these rumors this morning. According to its sources, Apple’s emphasis on cloud-based storage and its move to build a cheaper, smaller phone isn’t just about reducing the need to carry “a lot of memory” – it’s about removing the memory altogether.

Cult of Mac says that, “The iPhone nano will have no memory for onboard storage of media, our source says. It will have only enough memory to buffer media streamed from the cloud.” Instead, the new iPhone will pull all its content from MobileMe.

If true, that raises a lot of interesting questions about the functionality of the device. How will it handle photos? Will they be uploaded immediately to the cloud? What happens when you’re offline – out of range of 3G or wireless?

These aren’t the first or only speculations about the new iPhones that are expected this year. As ReadWriteWeb’s Sarah Perez has argued before, the new iPhone may be completely redesigned. Indeed, an iPhone without storage would mean not just a redesigned phone, but for many users, redesigned behavior.