Now, Chief Executive Steve Jobs and Apple are poised to roll out what has been dubbed the "iPhone," perhaps as soon as January next year at the Macworld conference that kicks off every new year, analysts say.
Speculation has simmered since even before the introduction of the ROKR phone from Motorola that uses a slimmed-down version of the iTunes digital music jukebox to play 100 songs. But sales were lackluster as users complained the phone did not hold more songs.
In recent weeks, blogs that cater to Apple fans have been buzzing insistently that the iPhone is coming. Just this week, the Taiwanese financial daily, Commercial Times, reported that Taiwan-based Hon Hai Precision Industry Co. Ltd. is building the iPhone.
"There is a lot of buzz," said Gartner analyst Mike McGuire. "But there are also a lot of things in the way that make it difficult. Which carrier and the like they use are not trivial challenges."
Jobs and Apple are famously tight-lipped about unannounced products. But company Chief Financial Officer Peter Oppenheimer did hint about a possible mobile phone with iPod-like functions during a conference call with analysts in July to discuss third-quarter financial results.
Asked to comment on how Apple would compete with offerings such as Sony's popular Walkman phone, Oppenheimer said he believed Apple would do just fine.
"We don't think that the phones that are available today make the best music players," he said. "We think the iPod is. But over time, that is likely to change. And we're not sitting around doing nothing."
Analyst Wu believes the iPhone would be a candy-bar-shaped phone, rather than a flip phone like Motorola's huge hit, the RAZR mobile phone.
And he believes the iPhone would not be too bogged down with all the bells and whistles often crammed into today's smart phones.
Wu estimates that a 1 percent share of a billion unit market, with the iPhone carrying an average price tag of $200, could mean about $2 billion a year more for the Cupertino, California-based company.
But Apple needs to learn from the ROKR and introduce a real phone, not just a music player with a phone jammed in almost as an afterthought, analysts said.
One other not inconsiderable decision is what cell phone standard -- CDMA or GSM, for example -- the phone would use and whether Apple would link up with one mobile phone company to provide the service.
Some Mac watchers, such as site ThinkSecret, have mentioned Cingular as an early, exclusive winner. Still others say the phone will be sold with an Apple-branded MVNO, or mobile virtual network operator, in which Apple effectively leases excess capacity from other mobile service providers and resells it to customers.