News from the Wall Street Journal, this smaller line of iPhones, codenamed the N97, would be sold alongside normal-sized iPhones, presumably the redesigned one arriving this July, and would sell for roughly half the price:
“The person who saw the prototype of the new iPhone said the device was significantly lighter than the iPhone 4 and had an edge-to-edge screen that could be manipulated by touch, as well as a virtual keyboard and voice-based navigation. The person said Apple, based in Cupertino, Calif., also plans to upgrade the iPhone 4. The new MobileMe file-storage and music service could be available as early as June, depending on the progress of licensing talks that are in their preliminary stages, the people familiar with the situation said. Apple had planned for the service to be available a year earlier.” – read more from WSJ