There's been a rumor of an iPhone Nano for quite a while now, but it has never come to fruition. Now Bloomberg is talking about Apple releasing a mini iPhone that would retail for $200 without being on a contract or including any subsidy.
Bloomberg has gone as far to say that "people who have been briefed on the plans" as their source of the information and claim that at least one person has seen the prototype (I'm guessing it wasn't left at a bar this time). The shrunken iPhone is supposedly one third smaller than the current model iPhone 4 and will include parts from the current model which helps Apple cut costs while it puts the more expensive parts in the next-gen iPhone 5.
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