Apple working on cheaper, smaller iPhones: Bloomberg

Apple Inc is working on new versions of the iPhone to take on the challenge from handsets based on Google Inc's Android software, Bloomberg reported citing unnamed sources that have been briefed on the plans.

One person who has seen the prototype of an iPhone that is cheaper and smaller than the most recent iPhone, asked not to be identified since the plans have not been made public, according to the report.

The company is also working on a technology that would make it easier to use the iPhone on multiple wireless networks, it said.

Chief executive officer Steve Jobs, who is on medical leave but nevertheless remains involved in strategic decisions, would make use of the lower prices to broaden the iPhones' appeal to ensure that it does not lose further ground to Android devices.

With cheaper iPhones, Apple will also be able to make inroads in Nokia Oyj's European and developing markets where it is especially popular.

The fourth quarter saw Google's share of the global smartphone market more than triple to 32.9 per cent, overtaking Apple's 16 per cent, according to analysts.