By Katie Marsal and Kasper Jade

Published: 01:00 PM EST

Apple Inc. may begin transitioning its flagship iPod models away from hard disk drive (HDD)-based storage and towards solid-state NAND flash memory by the end of year.

According to an "IT Hardware" report from Prudential Equity Group analyst Jesse Tortora, the move would pave the way for smaller form factor players, a more diverse model mix, and improvements to both battery life and durability.

"We believe that the video iPod transition from 1.8-inch hard disk drives to NAND flash memory may occur as soon as late 2007," Tortora wrote. "Our checks indicate that Apple is considering canceling its next generation HDD-based iPod design, with the form factor refresh involving a move to NAND flash memory."

The analyst said such a move would be consistent with Apple’s penchant for placing user experience ahead of cost concerns. He also noted that recent history supports the scenario, given the economics of a similar transition where Apple in late 2005 decided to move from the 1-inch hard drive based iPod mini to the NAND flash based iPod nano.

"Flash memory is clearly more expensive on a $/GB basis than hard disk drives," he wrote. "However, the late 2005 Nano transition to flash provides a guide as to the point at which the previously mentioned non-cost advantages of flash memory outweigh the cost premium."

Given that he sees flash storage capacities up to 32GB as being cost-feasible for the initial introduction of a new flash-based video iPod later this year, Tortora said the question becomes whether or not 32GB contains sufficient capacity to store video content.

"Apple currently offers 30GB and 80GB HDD-based models, and will have the option to increase storage capacity up to 120GB this year based on new perpendicular recording technology," he wrote. "While the higher capacities would allow for more video storage, we view battery life as the key consideration for a move to flash."

Tortora explained that a 30GB of HDD-based iPod is sufficient for around 40 hours of video content, but only has about 3.5 hours of battery life for video playback. He added that replacing the hard drive with flash memory would allow for an increase of about 60 percent in battery life to 5.5 hours of video playback.

In addition to the flash-based storage, the Prudential analyst believes other specifications of Apple’s next generation video iPod are will include a wider touch screen similar to that of iPhone, Wi-Fi to enable the transfer of digital content from Apple TV, and GPS functionality.

Tortora asserted that the addition of GPS functionality "should position the iPod as the central hub for all digital content (music, movies, GPS) in automobiles."

Indeed, one of the first reports on Mac OS X 10.5 Leopard published by AppleInsider affirmed that the next-generation Apple OS would introduce a geographic mapping solution, dubbed "Maps," that would employ GPS functionally.

A second report, believed to be extremely accurate at the time of publication, cited people familiar with the software as saying Apple may eventually leverage the technology to help track stolen Macs or iPods.

Apple has yet to disclose the extent of Leopard's feature set, choosing instead to keep several enhancements "top secret" until a date closer to the software's release.