By Kasper Jade and Prince McLean

Published: 02:00 PM EST (11:00 AM PST)

For several years now, an elite squad of engineers at Apple Computer have been working diligently to perfect an intuitive smart phone concept that would both conform to the company's integrated model and oblige chief executive Steve Jobs.

As AppleInsider has been told, it's the latter of those two feats that has thus far presented the utmost of challenges, largely preserving the project and its many facets behind the fortified walls of the company's Cupertino, Calif. home base.

It's believed that the initiative, which is different and slightly more ambitious than the company's "iPhone" project, truly gained momentum about three years ago alongside the development of Mac OS X 10.4 Tiger. Some of the device's original features, such as Bluetooth remote control of certain Mac OS X functions, were meant to coincide with those that would have subsequently appeared in the final version of the Tiger operating system.

But as the story goes, Apple took the latest iteration of its proprietary smart phone hardware and software in the early summer of 2005, slapped it together inside an enclosure reminiscent of a fourth-gen iPod, and hit the road.

The objective at the time was to showcase the device's software to potential wireless partners and then appoint contractors to assess network requirements and the feasibility of certain features. Per Jobs' request, the phone's software interface was to be a carbon copy of Front Row -- Apple's one-touch media experience application. "He wanted every feature no more than one click away," a source told AppleInsider.

People familiar with ensuing talks say the "real push" behind the device was its extensive integration with Mac OS X and the Macintosh platform. Apple is said to have demonstrated several features that called upon a still unreleased version of the company's .Mac internet services that would allow users to control certain Mac functions remotely. These included beaming contacts, tasks and calendar appointments to Address Book and iCal from remote locations. However, the Mac maker remained mum on whether it planned to release Windows compatible versions of those desktop applications.

Locally, the conceptual device called for syncing and management through the company's ubiquitous iTunes digital jukebox software -- similar to the first Motorola ROKR phones. According to a source, video-based ringback tones could be designated through Address Book and synced through iTunes. Similarly, a "call ahead" feature would allow users of the phone to pre-record a video clip that could then be transmitted to mobile phone at the receiving end, where it would play before the call was answered.

Full integration with iChat -- Apple's proprietary messaging and video conferencing software -- was also said to be a work-in-progress. A source familiar with the development efforts said Apple had tapped third parties to lend a hand with certain protocols that would allow for iChat video conferencing between the handset and desktop Macs. The source, however, never saw a fully functional demonstration of this capability.

During its consultations with various agencies and potential partners, there were rumors that Google had expressed interest in developing specific applications for the phone that would be made available for purchase and download on an individual basis through Apple's iTunes Store, similar to the way the company handles game downloads for fifth-generation iPods.

At the service level, the iPod maker was said to be in serious talks with wireless carrier T-Mobile, but had separately commissioned a thorough analysis of data center requirements in both Europe and the Americas in the event that it chose to go the MVNO route.

Within months of those talks, however, Apple broke off all contact with T-Mobile and its outside contractors. Word spread that Jobs at the highest executive level was genuinely unhappy with some of the phone's hardware specifications, which he believed hampered the overall aesthetic of the device.

According to a source, the Apple cofounder insisted the phone return to the design phase where it was to be restructured from the ground up in order to meet the requirements of a strict 10-point list he had compiled.

At this point in time, Apple had not yet inked a deal with T-Mobile, but people familiar with the matter said the two companies had become "very good friends."

If recent analyst reports are accurate, the Apple smart phone project -- now several years in the making -- is once again approaching the final development stages.

In a research note released to clients last month, American Technology Research analyst Shaw Wu said Apple, in addition to its more rudimentary iPhone device, has been working on a second cell phone model that will incorporate messaging capabilities.

"From our understanding, it will leverage off existing iChat software that runs on Macs," he wrote. "We believe it will focus initially on mobile IM as opposed to e-mail."

While Wu remained uncertain on when Apple planned to deliver the second phone to market, he said the device likely represents the company's "smart phone" and could be branded as "iChat mobile."

Along the same lines, Prudential analyst Jesse Tortora has also been quite vocal in saying Apple maintains two distinct cell phone projects.

Just this past Monday, the analyst reiterated those beliefs, stating in a research note that the iPod maker is likely to introduce an advanced smart phone device with WiFi capabilities and a slide-out keyboard by the third quarter of 2007.

He said the smart phone will trail by a quarter or two the release of the company's hybrid cellphone/MP3 player handset (iPhone), which, he added, is already in the manufacturing stages.