COMPUTER industry insiders believe that Apple is preparing for a Christmas sales battle with the ultimate handheld device: an iPod that lets you download on the move and doubles as a phone.

The next upgrade of the iPod, of which 50 million have been sold, is expected to be capable of transfering audio and video MP3 files to the music player without wires.

The use of wi-fi chips in the players would bypass the need for a computer, allowing users to download music directly from their wireless internet connection.

There are thousands of wireless “hotspots” across Britain which could be used to transfer files.

Some analysts are also predicting that the Californian computer company is preparing a “wireless” iPod that could also incorporate a phone, the ultimate converged device. Speculation about the product comes as rumours intensify that Microsoft will be unveiling its own device with a wi-fi chip, dubbed the “iPod killer”.

However, Steve Jobs, Apple’s chief executive, has previously expressed scepticism over a wireless device with iPod functions. It is likely to require wireless Bluetooth headphones, which use heavy batteries that have to be recharged repeatedly.

Technology analysts note that Apple, which has been releasing two new iPod models each year, has launched nothing so far in 2006.

If engineers can overcome the battery issue, analysts expect the group to introduce a wireless version of the iPod in the autumn. But a spokeswoman for Apple declined to comment on the possible launch yesterday.

Some analysts have speculated that the group could also now produce a model that includes a Bluetooth chip to enable the use of stereo headphones without the need for wires.

The group, which dominates the MP3 player market, reassured Wall Street this week with a 32 per cent rise in sales of the music player in the third quarter. The company sold more than eight million units in the period, calming fears that the popularity of the MP3 player could wane.

Steve Jobs, chief executive of Apple, said: “iPod continued to earn a US market share of over 75 per cent and we are extremely excited about future iPod products in our pipeline.”

Analysts had feared that the company would fail to sustain previous growth levels without regular new models in the face of intensifying competition from a string of major Asian manufacturers, including Sony and Creative.

In recent years Apple has introduced a string of models in addition to the original iPod. The Shuffle, a low-priced basic model, was followed by a slimmer model with colour screen. The latest incarnation is also capable of playing videos. Wednesday’s results showed group net profits of 54 cents a share, a 46 per cent improvement on the same quarter of last year and a long way ahead of the 44 cents a share expected by analysts.

Sales rose 25 per cent to $4.4 billion (£2.4 billion) in the quarter, helped by a rebound in sales of the company’s computer range.

Sales of Apple Mac computers rose 12 per cent to 1.3 million units, marking an improvement on April’s growth, but then sales appeared to stall.

Analysts said that the switch to Intel chips appeared to put off some buyers from making purchases.

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Apple should focus on improving iPod video

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