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According to Blair, Apple's fifth generation iPhone will be an incremental update to the current iPhone 4, not a major redesign. It will feature a faster A5 processor, a higher-resolution eight megapixel camera and possibly a larger screen. But beyond this, its design will be largely similar to that of the iPhone 4.

Says Blair, "We don't expect a second, dramatically different iPhone to accompany this as we don't think Apple needs to have 3 models in the market to address the high end, mid-tier and low end since the iPhone 4 (with memory lowered to 8 GB) will drop to $99 and effectively attack those markets."

That's an argument that does make a lot of sense. Supply chain chatter has suggested Apple's pre-paid iPhone, the so call "iPhone 4S," would be identical to the iPhone 4 with some minor cosmetic changes, a better camera, and faster processor. Which means it would likely cost more to build.

"Why would Apple bump up only the processor specs of the iPhone 4 in addition to a newly designed iPhone 5 if the goal is to sell it into the pre-paid market at a lower cost," Blair asks. "A 4S would simply cost more and a 4S itself wouldn't create a mid-tier market unless it was priced at $99 and the iPhone 4 went to $49 with the new iPhone at $199. We see this scenario as unlikely."

Apple plans to unveil its next generation iPhone next month, technology blog AllThingsD said Wednesday.

AllThingsD cautioned that Apple could "change its plans anytime," but said the present plan calls for Apple's new chief executive Tim Cook to preside over the launch of the iPhone 5 on October 4.

Cook, 50, replaced Apple's ailing co-founder Steve Jobs as chief executive of the Cupertino, California-based gadget-maker last month.

Citing "sources close to the situation," the Dow Jones-owned AllThingsD said the iPhone 5 would go on sale within a few weeks after the announcement.

Jobs, 56, the Silicon Valley visionary behind the Macintosh computer, the iPod, iPhone and iPad, stepped down as Apple's CEO on August 24.

Jobs has presided over Apple's splashy product launches in the past and AllThingsD said "the pressure will be on Cook to turn in a good performance."

"What will be interesting to see, of course, is if Jobs himself will also make an appearance, which is something that is likely to be determined by his health, in a decision that will be made very close to the event," it said.

Jobs underwent an operation for pancreatic cancer in 2004 and a liver transplant in 2009.

Apple released the iPhone 4 in June 2010 and sold 20.34 million of the devices last quarter.

Apple shares have been trading at record highs this week and the stock was up 1.37 percent at $419.13 on Wall Street on Wednesday.

Source: news.yahoo.com