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.
The report also predicts an overhaul to MobileMe which would make it free and serve as a locker for your media.
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.
Apple has built a billion dollar data center in North Carolina that should be operational right about now. This data center is expected to be the backbone of the new MobileMe service.