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Kevin Chang cited a recent patent filing that describes using an iPod's clickwheel for dialling as part of "a user interface for controlling an electronic device, particularly a multifunctional electronic device that is capable of operating in multiple modes as for example a phone mode for communications and a media player mode for playing audio files, video files, and the like".

Chang then tapped sources with the supply channel and concluded that Apple is working on an "iPhone nano" with limited functionality and without the fully grown iPhone's multitouch interface.

"We believe that iPod Nano will be converted into a phone because it's probably the only way for Apple to launch a lower end phone without severely cannibalising iPod Nano," Chang wrote in his report.

The patent application, which was filed in November, was one of three published in the past week which hint at a clickwheel-driven phone. Of the other two, one describes a method of typing by selecting characters from a palette and another describes dividing the wheel into virtual zones to enable quick dialling.

Piper Jaffray analyst Gene Munster believes that Apple's current focus is on deploying iPhone technologies in new iPods.

"We believe the iPhone reveals much of what the iPod will soon be," he wrote in a note to clients. "iPods with some of the touchscreen features of the iPhone should lessen the impact of cannibalisation."

He adds that like the iPhone the new iPods will run a version of Mac OS X but will not be released until January 2008, although Apple's has generally released new versions of the media player in September and October, ahead of the year's busiest shopping period.

Meanwhile, one thing

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that Apple may not be working on is Flash. RoughlyDrafted argues that the reason that the iPhone does not support Adobe's multimedia plug-in is that Apple does not want encourage websites to rely less on open standards and more on proprietary formats like Flash.

Wall Street Journal columnist Walt Mossberg wrote last week that Apple is working to get Flash on the phone, but cited no evidence. RoughlyDrafted's Daniel Eran is not so sure.

Apple, he argues, wants the Web to be an open platform that it can support inside Safari.

"In a world where critical portions of the web are rendered by Flash, that's no longer the case," he writes. :Instead of the web being rendered in the browser, it's rendered within Adobe's Flash plugin."

Apple's developer notes for the iPhone make no allusion to future Flash support, instead they recommend that developers use open standards because open standards are what Apple plans to support.

"The web is always evolving, and as it does, so will Safari. You'll want to keep informed of the evolving standards emanating from WHATWG [ Web Hypertext Application Technologies Working Group] and W3C standards bodies," Apple says

The WHATWG - of which Apple is a member - is specifically developing alternatives to using Flash and accompanying Adobe technologies Flex and AIR.

"Apple isn't just barking about Web standards, it has eaten its own recommended dog food by stripping Flash from its corporate website entirely," Eran writes.

"Apple is also working with Mozilla and Opera developers to advance the Web browser into a real, standards-based application platform, not just a container for running Adobe Flash and Sun Java applets. WHATWG's HTML 5 will delineate the browser infrastructure for web apps in order to make a lot of plugin middleware unnecessary."

And if any evidence were needed of Apple's aversion to Flash, look only at the recent deals with YouTube, that put the video sharing site's content on Apple TV and iPhone, but not in the usual Flash format, but re-encoded in the open H.264 format.