Apple decided to lose some of the memory, which is by far the most expensive component of the iPhone (up to one-quarter of the devices cost, according to iSuppli estimates).
By "some" of the memory, we mean ALL of the memory. The iPhone nano will have no memory for onboard storage of media, our source says. It will have only enough memory to buffer media streamed from the cloud.
It's thought that this cloud storage would be provided by a revamped MobileMe. The WSJ recently reported that the service would undergo a major overhaul and be offered free.
"I'm talking strictly storage memory here," said their source. "It would be a mostly cloud-based iOS."