Apple plans big price cut for new iPhone

In the UK the lower specification 8MB iPhone is currently available for £34.26 per month on a 24-month pay monthly contract with O2.

Next week's Developer's Conference, where Apple typically launches its new products, approaches as reports claim founder Steve Jobs is planning to return to work after a period of medical leave.

Jobs, who was treated for a form of pancreatic cancer in 2004, announced in January he was taking a leave of absence until the end of June.

Apple is not commenting on the reports of the price cut but if true the news will be a blow to rival Palm's hopes for its Pre smartphone, which launches in the US tomorrow with a price of $199.

Palm, famous for its PDAs in the 90s, is aiming to revive its fortunes and take market share from Apple.

Palm was a household name in the 90s, but since then PDAs have been largely supplanted by mobiles with the company's models failing to catch hold of the new trend. 

The launch of the Pre aims to change this and the phone, which offers web browsing and app shop applications, has received encouraging reviews.

It is launching into a competitive market as Nokia also prepares to launch its own smartphone, the N97.

Palm developed the Pre from a standing start with the intention of launching it before the Apple product. However critics suggest the firm has been hampered by its self-imposed deadline and availability could be limited by production issues.

Additionally there is a version of Apple's app store for the phone but it is only a test version and contains a relatively small number of applications.