In an attempt to expand its market base, Apple is developing new lines of smaller, cheaper iPhones, the first being code-named N97. The iPhone will be about half the size, as well as half the price of Apple’s main line of iPhones.

Apple is also reinventing its MobileMe online storage space service, which currently ranges in price from $99-$149 per year. The new service will has the possibility of being completely free allowing users to upload photos and videos there instead of directly onto their devices. The result would be more free space on the phone and no fees attached.

Apple has also been considering using MobileMe as its new music downloading platform replacing iTunes, although there are currently no details on this possible transformation.

Apple CEO Steve Jobs, who took medical leave last month has still been closely involved in the development of the N97. Jobs has made it one of his top priorities in the company’s developments, despite his medical condition, reported Yukari Kane at the Wall Street Journal (WSJ).

The launch date for the new devices and software are due sometimes this summer, but no official release date has been set, according to the WSJ.