Touch Screen Nanos on the Way?

My colleague Olga Kharif quite succinctly walks you through in this blog all the reasons why its unlikely Apple in the next month or so won’t release a stripped-down version of the iPhone.

But I would not be surprised to see a new touch-screen iPod nano hitting store shelves in time for the holidays. There’s been a lot of criticism of the “little fatty” form factor of the current generation, but what if that same shape was made a little larger, with a full touch interface?

Out in the wild the other day in San Francisco, I saw a guy whip out and change his music on a black touch-screen device that looked suspiciously like an iPhone, only smaller. Apple often has key employees test new devices for bugs before rolling them out, so it’s not out of the question.

Of course, one glimpse does not a product make. But others are suggesting it’s not just my imagination working overtime. Analyst Charles Wolf at Needham says this: “The fall line-up of iPods should change in a dramatic fashion” to reflect design changes that came with the iPhone. And one of Apple’s business partners tells colleague Peter Burrows that an iPhone-shaped iPod nano is on its way.

Why would you need a touch-screen nano? In addition to simply being cool, Apple might make available some of its AppStore applications to other devices beyond the iPhone and larger-screen iPod Touch. The company also could be prepping that long-rumored subscription service. Or it could be announcing the next step in its plans to boost the use of video on Apple devices.

Beyond that, it could just make for good financial sense. The current nano sells for $149 or $199, depending on memory configuration. Double the base memory on new versions, add bigger screen and touch interface, and Jobs & crew could up the price slightly, boosting margins.

The company also has the competition to think about. Sure, no one has come close to Apple in digital music (despite lots of money being thrown at the problem), but Research in Motion hopes to give Apple a run with its upcoming Thunder touch-screen phone and email device. Rumor has it, the device will be unveiled in early October and will include over-the-air Rhapsody music service, a big and beautiful screen and external storage. Exclusive at first to Verizon Wireless, the dual EV-DO/HSPA-network device could be a hit with business people and “pro-sumers” looking to carry just one device around for work and play.

We’ll know soon enough. Apple likely will schedule another “very special event” for sometime in September. And RIM’s gotta take the wraps of its long-awaited device at some point, right?

Before it's here, it's on the Bloomberg Terminal.