Can You Smell What the iPod Touch Is Cooking?

The best evidence of this point, which I've argued before in this space, is the iPhone's overlooked cousin, the iPod touch. On its face, the touch may seem to be little more than an iPhone without the phone features. It can't connect to cellular networks for calls or Internet access, relying instead on WiFi to go online. Aside from playing music and video, it can fetch e-mail , clips from YouTube , stock quotes, and weather forecasts. It can also help you navigate from point A to point B via Google (Nasdaq: GOOG) Maps.

Notably, Apple Chief Operating Officer Tim Cook has taken to publicly describing the touch as a "mobile WiFi platform," as he did in remarks at a Goldman Sachs conference on Feb. 27. In conversations with other Apple executives, I've been told that the touch can now be considered the flagship product of the iPod family (not counting the iPhone, which remains a product category unto itself). Not the nano. Not the shuffle. The touch.

An E-Book Reader?

This emerging realization about the touch has multiple possible ramifications. If the screens on the iPhone and the iPod touch are suitable for reading Web site content and e-mail, why shouldn't they be suitable for reading books and magazines? All that's needed are willing content suppliers for the iTunes Store, which could become a central distribution point for all kinds of digital media -- a record store, a video shop, a bookstore, and a newsstand all at once.

John Markoff of The New York Times and others have mused that a next logical step might be an Apple reader akin to Amazon.com's (Nasdaq: AMZN) Kindle. I think they may be at least partially right. After all, Amazon.com is now in the music business , selling unprotected MP3 downloads in direct competition with iTunes. Now that Apple offers most major types of entertainment media on iTunes -- music, TV shows, movies, audio books -- and will soon be in the business of selling applications for the iPhone and iPod touch, it stands to reason digitized print media could be next.

However, once print media becomes part of the equation, the size of the screen on the touch, and for that matter the iPhone, becomes an issue. The screen on the Kindle measures 6 inches diagonally, nearly twice that of the iPod touch. Having used both the touch and the Kindle, I have to say that the larger screen is preferable for reading anything that takes longer than five minutes.

Yet even if Apple does actually have one in the pipeline, I'd say that a reading device alone would be thinking too small. If the iPod touch is indeed the vanguard of a new family of media devices, any larger-screened descendant would have to do much more than simply add the ability to read digital versions of the printed page.

A Portable Minicomputer?

If the iPod Touch version of OS X is truly as powerful as Apple says it is, shouldn't this prospective reader serve as more than an entertainment platform, as something that can help you get things done? Why not adapt Apple's "Back to My Mac" feature, which lets you gain access to files on your home Mac remotely from a Mac notebook, to let you do the same via WiFi from your Apple reader? You'd be able to grab that presentation you forgot on your home computer, or play that song you were just telling someone about. Give that handheld sufficient storage, say 64 GB of flash memory, and you just might go to the trouble of carrying all sorts of important documents around, not just your music and video library.

Why stop at simply displaying documents? You'd want to edit them right there on the screen. That would make it a portable minicomputer. So where's the keyboard? Right on the screen. Put that multitouch screen to work displaying a virtual Qwerty keyboard, only bigger than that found on the iPhone and the touch, and suitable for two-fingered hunt-and-peck typing. Add a Bluetooth wireless connection -- which the iPhone has, but the touch lacks -- and you'd also have the option of using a conventional wireless keyboard.

Atom Effect

Bluetooth would also come in handy for a wireless headset to make Internet phone calls on the Skype and Gizmo Project clients that would inevitably follow. Skype is already available on Sony's (NYSE: SNE) Mylo, a WiFi messaging device, and has been embedded in a series of WiFi handsets from Cisco Systems (Nasdaq: CSCO) and Netgear. SIPphone's Gizmo Project calling software has been available on Nokia's (NYSE: NOK) Web tablets for some time.

This wireless micro-Mac wouldn't have the processing power of a full-fledged Mac notebook, but it could serve as a pretty robust dinghy that would do plenty more than most handhelds. Intel (Nasdaq: INTC) , which has been talking about a new class of devices that lie somewhere between notebook PCs and smartphones, has a new low-power chip called the "Atom" that it hopes will drive the creation of this new category. I'll admit I've been skeptical of the idea since it was first floated in 2006. But I hadn't been thinking of what a company as innovative as Apple, now Intel's marquee customer, might do with this idea.

The conjecture and speculation about what devices the iPod touch may spawn will certainly be interesting to watch in the coming months. Given the signals it's sending, Apple is just starting down what looks to be a fascinating path.