An analyst has said that Apple is working on not one but two iPhones, prompting a resurgence in rumours predicting doom for traditional mobile phone makers.

Shaw Wu, a Wall Street analyst with American Technology Research wrote in a research paper this month that the firm’s second phone will have IM (instant Messaging) capability and will integrate closely with its iTunes software.

In the research paper, published November 20, Wu says: “Our research indicates that an Apple-designed smart phone has moved from concept to prototype and recently has progressed to near completion as a production unit.”

Apple, which will not discuss the iPhone, saw its share price rise sharply on the rumours, and on Tuesday climbed to an all time high to close at $88.60. Apple’s previous high was $87.

Wu’s report is the first official document on the device which has regularly been discussed but never gained much credibility. However, Wu’s research was enough to convince Wall Street that Apple really is working on a device that is likely to be a hybrid of its iPod and a next generation handset.

“We believe this smart phone has been in development for over 12 months,” says Wu. He adds that Apple has “overcome substantial challenges including design, interference, battery life and other technical glitches”.

Although Apple has done little to fan the rumours, they have surfaced regularly, particularly around analyst comments. Back in September, Gene Munster, an analyst with Piper Jaffray in the US, wrote that Apple would debut an iPhone within “four to six months”. Later an article in the Chinese Commercial Times reported that an electronics component firm, Foxconn Electronics, had won a contract for 12 million mobile devices.

Wu’s comments, which describes both phones as looking like the iPod Nano, goes as far as to say the iPhone could be announced at the MacWorld Expo in January.

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