By Katie Marsal

Published: 12:00 PM EST

While checks within Apple's supply chain suggest the company is researching a low-end iPhone design, rumors that such a device will surface this year are overly optimistic, according to Lehman Brothers.

The equity research firm used a research note earlier this week to address a report by UK's Daily Mail, which asserted that a low-cost 'iPhone nano' is set to follow on the heels of the iPhone 3G with a release ahead of this year's holiday shopping season.

"While we believe Apple is working on a lower-end iPhone form factor, we do not think one will come until Spring 2009," analyst Ben Reitzes advised clients. He then outlined several reasons supporting his thesis.

First and foremost, Reitzes said, Apple is still struggling to reach a supply and demand balance on its latest handset, the iPhone 3G released just last month. With plans to expand availability of that handset to 50 more countries through the end of the calendar year, releasing a new iPhone model mid-way that process would only threaten to complicate matters.

Reitzes also recalls that Apple customers became furious last year when the company slashed the price of the original iPhone just months after launch, and therefore common sense would suggest that management would be looking to avoid a repeat episode of that scenario, he said.

"While we have picked up indications of a product like this in the supply chain, it doesn’t appear that the company has yet solidified the form factor, so it may be hard to get it finalized in time for the holidays," the analyst added.

In his report Monday, Reitzes also backed a recent report on heightened iPhone production. He said his own checks indicate that Apple will manufacture more than 3 million of the handsets this month alone, making his estimate of 3.8 million units for the September quarter seem overly conservative; Apple sold 1 million of the devices in the first three days alone.

"We believe that strong demand in the initial countries could make a rollout overseas take longer simply based on supply," he said. "We believe that initial demand overseas could be quite strong and estimate 8.3 million iPhones could be sold in [the fiscal first quarter of 2008] (December) with 24.2 million sold in fiscal 2009."

Reitzes reiterated his 'Overweight' on Apple shares with a $220 price target.