Edible Apple

It’s a classic battle of he said – she said.

Over the last few days, reports from both Bloomberg and the Wall Street Journal conveyed that Apple was working on a smaller iPhone to better compete against the smattering of smartphone options offered by a growing number of Android handsets.

Upon hearing these iPhone Nano rumors, we were somewhat skeptical given that the source cited by both Bloomberg and the WSJ seemed a bit sketchy. But enough patting ourselves on the back, here’s the scoop.

The New York Times, citing it’s own, albeit confidential, source reported on Thursday that Apple is not, in fact, working on a smaller iPhone form factor.

Another person who is in direct contact with Apple also said that the company would not make a smaller iPhone at this time, in part because a smaller device would not necessarily be much cheaper to manufacture and because it would be more difficult to operate.

More important, a phone with a smaller screen would force many developers to rewrite their apps, which Apple wants to avoid, the person said.

The importance of growing marketshare, for Apple, isn’t just to make money off of hardware sales, but to create as big of an iOS ecosystem as possible. Developing an iPhone half the size (as was rumored) of the current iPhone 4 would present a device that would be all but useless to run apps on. Indeed, a common complaint heard amongst Android developers is that accounting for all the varying screen sizes and internals of Android handsets is a drain on resources, not to mention time consuming.

The Times also relays a message from a senior Apple executive who said during a recent meeting that it doesn’t make sense for Apple to release multiple iPhone models and that the company plans to maintain its practice of releasing a new iPhone model every year and making preceding models cheaper.

Still, Apple may release a cheaper model iPhone, albeit with the current iPhone 4 form factor, by offering a phone with limited memory and perhaps including a cheaper camera.

“Although the innards of the phone, including memory size or camera quality, could change to offer a less expensive model, the size of the device would not vary,” said the person, who has worked on multiple versions of the device.

Meanwhile, the report corroborates earlier reports that Apple is planning to make its MobileMe service free, which would, of course, come in handy with a cheaper iPhone sporting less memory.

“The goal is that your photos and other media content will eventually just sync across all your Apple devices without people having to do anything,” the person said. If more iPhone users stored files online, Apple could make cheaper devices with less storage. Flash storage is one of the iPhone’s most expensive components.