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Apple Faces Cold Christmas

Some say a faster iPhone may not be in the holiday cards.

Brace for more disappointments ahead in the Apple (AAPL) - Get Apple Inc. Report iPhone saga.

Fans have been dreaming of a 3G Christmas. But observers are saying Apple probably won't be offering the faster wireless version of the iPhone this year.

"I don't think we'll see it until the first or second quarter of next year," IAG Research's Roger Entner says of the third-generation wireless iPhone, which would provide speedier Web access than current versions.

Apple says it doesn't comment on rumors. But this new slant on the holiday product picture emerges just as Apple is taking some heat over its handling of iPhone pricing.

CEO Steve Jobs gave a presentation Wednesday announcing, among other things, that the company was killing the 4-gigabyte iPhone and slashing $200 off the price of the remaining 8-gigabyte phone. The decision to drop half the iPhone lineup validates rumors

reported July 31 by

that Apple was cutting production in half.

Last week's price cut decision was so abrupt that Apple's exclusive wireless partner,


(T) - Get AT&T Inc. Report

, learned of the changes during Job's speech, say sources.

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The jarring price cut by Apple and the predictable backlash managed to take management by surprise. Jobs quickly backpedaled, apologizing to customers and offering iPhone buyers a $100 store credit.

So now, after two months of essentially overcharging eager gadget lovers for a 2.5G EDGE phone, Apple will not be able to reward loyal holdouts who had been waiting for a full-speed version of the iPhone this year, say observers.

One of the problems behind the 3G delay, says Entner, is that the speedier HSDPA, or high-speed downlink packet access, network technology has much higher power demands -- requiring new bigger, stronger batteries.

Optimists had figured the price cut and product shuffle, while sudden, was part of a bigger plan to make way for a higher priced 3G iPhone on the eve of the holiday buying season.

But without a 3G iPhone to fit that story line, some investors and industry watchers are worried that the smooth-as-silk Apple operation may have hit a rough patch with its mobile phone strategy.

"They expected, internally, higher sales than they have seen" for the iPhone, says one industry strategist. "So they decided to cut the price to stimulate demand."

Apple says it is on track to hit its 1 million units sold goal this month, a respectably strong performance for a new device that carried a $600 price tag.

But that means Apple so far has

failed to sell out the 1 million phones it was prepared to supply in the first week of its introduction -- signaling to industry experts that there was a limited demand for the "revolutionary" new device.

The failure of the iPhone to sell out early in its run is "an unpleasant shock" for management, says one industry source.

Of course, a big key to Apple's full year 2008 goal of selling 10 million phones is success in Europe. And though three wireless partners are

close to signing on, the absence of a 3G phone, says one Apple investor, will likely be seen as a negative data point.