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Apple Inc. is developing a new line of iPhones and considering an overhaul of its online file-storage service to make it easier for customers to access entertainment files and personal photos and videos, people familiar with the matter said.
One of the people, who saw a prototype of a new iPhone several months ago, said the new device is intended to be sold alongside the current line of iPhones and would be about half the size of the iPhone 4. The phone, one of its codenames is N97, would be available to mobile carriers at about half the price of Apple's main line of iPhones, the person said.
Apple also is exploring a major overhaul of its MobileMe online storage service, the people familiar with the matter said. The service currently requires an annual subscription payment of $99 to $149. Apple is considering making Mobile Me a free service that would serve as a "locker" for personal memorabilia like photos and videos, eliminating the need for consumers' devices to carry a lot of memory, the people familiar with the situation said.
MobileMe could become a focal point for an online music service that Apple has been developing for more than a year, the people said.
MobileMe and the new line of iPhones are among Apple Chief Executive Steve Jobs's top priorities, and he has been closely involved in the development efforts despite going on medical leave in January, one of the people said. The person said the new iPhones and the revamped MobileMe service are intended for release this summer, though those plans could change.
An Apple spokeswoman declined comment. Bloomberg news services earlier reported that Apple is working on a smaller, less-expensive iPhone.


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