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Pears vs. Apples: Clone Wars Escalate

Fans of the iPhone may not have to wait much longer for an upgrade.

Apple (Nasdaq: AAPL) could release three new versions of the popular mobile phone by the end of this year, suggests a research note from investment bank Canaccord Adams.

The first, a 32 GB phone in multiple colors, is likely to arrive in the next six months. The second is likely to be modeled after the 2.5G phone and is apparently destined for the Chinese and Indian markets.

The third is expected to be one-third smaller than the current models and to have components similar to the 3G iPhone. This slimmed-down, smaller iPhone is expected to retail at US$99, substantially less than the current prices of other iPhone models.

The news comes from recent checks with Apple's carrier partners, Peter Misek, an equity analyst with Canaccord, says in the note.

Apple did not return repeated phone calls seeking comment.

Following the iPod Model

"This model is a replay of the iPod model," said Carl Howe, a mobile telecom analyst with the Yankee Group. "They started with one iPod and then went to three. I can see how they'd get there."

However, Howe is skeptical about reports of a $99 iPhone, based on comments made by Apple COO Tim Cook during the company's last conference call.

"You know us," Cook said. "We're not going to play in the low-end voice song business. That's not who we are. It's not why we're here. We'll let somebody else do that. Our objective is not to be the unit share leader in the cell phone industry. It's to build the world's best phones."

On the one hand, having a high-end and low-end phone would allow Apple to address a broader market with its products, much as the company has with the iPod, Howe told MacNewsWorld.

"If I were Apple, though, I'd be very careful about this," he said. "They don't want to follow Motorola (NYSE: MOT). When the Razr came out, it was $400, retail. But a few years later, they were giving away free phones. Apple doesn't want to go there. We may see something akin to an iPhone nano, but it won't be their big offering."

Another problem for a smaller, slimmed-down iPhone is how to accommodate the device's signature touchscreen.

"If you look at the screen on the iPhone today, I think you have to wonder if a touchscreen on a device that is one-third smaller makes much sense," Howe said.

We Will Clone You and You Will Like It!

Achtung, Apple!

Even as Apple is fighting a small U.S. Mac clone manufacturer in federal court, a German company called "PearC" has begun selling its own version of a Mac clone.

The PearC clones appear to be no joke. The PearC Starter retails at 499 euros ($643) and comes with dual-core processors and up to 750 gigs of hard drive space. The PearC Advanced retails at 799 euros ($1,030) and, at the buyer's option, can be equipped with a powerful Core 2 quad processor.

The PearC Professional starts at 1,499 euros ($1,934) and comes with 1 terabyte (1,000 gigs) of hard drive space, as well as a powerful Intel (Nasdaq: INTC) core i7 processor.

The Mac clones are available in Germany, Belgium, Denmark, Finland, France, Greece, Ireland, Luxembourg, Italy, the Netherlands, Austria, Poland, Portugal, Sweden, Spain and the United Kingdom, according to PearC's Web site.

The Psystar Case

The viability of the PearC machines remains in question, however.

Just last week, a federal judge in California ruled that Florida-based Psystar could move ahead with its attempts to prove that Apple has violated federal copyright laws.

Psystar, which makes Mac clones designed to run OS X, has accused Apple of misusing the copyrights associated with OS X to keep Psystar from manufacturing its Mac clones, called "OpenComputers."

The dispute between Apple and Psystar started in July when Apple sued the smaller company for copyright infringement. Psystar responded with a claim that Apple held a monopoly in the market for Mac computers. The claim was thrown out by a federal judge in San Francisco.

That's when Psystar issued counterclaims alleging copyright misuse.

"It's sort of interesting," said Chris Collins, an intellectual property attorney with Vanderpool, Frostick & Nishanian. "This is going to be a question of German law and how it will affect the [end user license agreement] as well as consumer laws and antitrust laws."

What, might you ask, is an "end user license agreement," or, as it's known in industry parlance, a "EULA"?

"Any time you get a software product, there will be a EULA from the owner that says you can't sell copies of it or reverse engineer it," Collins said. "Any modifications you make may not be commercialized and are owned by the copyright owner."

Whereas Psystar has argued in court that those restrictions overreach what is permissible under American copyright law, PearC seems to be saying that the EULA is invalid in Germany, Collins said.

"I am not an expert in European patent or antitrust law," he said. "I don't know how this will turn out. If nothing else, it will be great publicity for PearC. I'd be hesitant to order one of these things though, unless you're in Germany."

Stock Snapshot

Apple's stock closed at $102.51 per share on Monday, up 10.2 percent from a week earlier.That surge in Apple shares probably had more to do with the general dynamics of the stock market than with anything particular to the company, Andy Hargreaves, an equity analyst with Pacific Crest Securities, told MacNewsWorld.

Prior to Tuesday's overall market decline in response to bailout jitters, the market had generally been up, and there had been a focus on high-quality companies with strong balance sheets, Hargreaves said. "Apple fits that bill. When the market's up as a whole, Apple is probably going to be up a little more."

Apple shares closed at $97.83 on Tuesday, down 4.6 percent.