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minimeIt’s easy to go overboard with Apple rumors, and that’s what I fear is happening with this little tidbit: A source tells Cult of Mac that the rumored iPhone Mini will only stream media over the cloud, and it won’t have any storage onboard to play back media.

Now think about this for a second. What does Apple have to gain by implementing such a horrendously un-user friendly design? Would the company that invented the iPod really prevent users from storing music on their device? Especially when that device may also be running on AT&T’s notoriously unstable 3G network?

The argument Cult Of Mac’s source gives is that Apple is looking to cut costs as much as possible for the smaller iPhone. By removing flash memory used for storage, one of the most expensive components in the iPhone, Apple could easily shave a significant chunk off the cost of building the device. The device will instead contain just the bare amount of memory necessary to stream media, potentially from Apple’s MobileMe service, which we reported yesterday may end up serving as a digital locker for users’ media.

I just don’t buy it. Apple could save money in plenty of other ways that wouldn’t cripple the iPhone Mini as much. In particular, Apple could just keep producing the same A4 chip and other hardware used in the iPhone 4 for the iPhone Mini, meanwhile reserving the more expensive new hardware for the iPhone 5. It certainly makes more sense than Apple creating a device that is fundamentally incompatible with the way the iTunes Store has functioned since it launched in 2003.

And then if you consider how much cheaper flash memory is getting these days, Apple may not end up saving that much at all by forgoing onboard storage.

Will Apple eventually release a device that will only stream media from the cloud? Sure — but that’s going to be a while from now. Apple, a company that always thinks about user experience, would most likely wait until 4G cellular networks are more readily available before they force users to only stream media. Additionally, Apple needs to build up the infrastructure to stream media via MobileMe and the iTunes Store at a moment’s notice.

Here’s what I think Cult of Mac’s source is trying to say: The iPhone Mini (or Nano, or whatever) will have significantly less storage than a typical iPhone. Most likely 8 gigabytes of storage — the same as the lowest end iPhones right now. Apple won’t prevent users from storing their own content, because that would be crazy. But since it has a small amount of memory, Apple will likely push the ability to stream media via MobileMe as well.

Streaming, therefore, will augment the iPhone Mini, but it won’t be the only way to consume media.

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