Apple's most-anticipated product of 2004 may not exist. Although rumors have been swirling about an entry-level iPod, which might sell for as little as $99, skeptics have remained, well, skeptical. We won't know for sure until Apple CEO Steve Jobs takes the stage today at Macworld.

The problem is storage. Unlike less expensive MP3 players, which use flash memory for storage, Apple's iPod uses a tiny hard drive to hold up to 10,000 songs. To make a tiny, inexpensive iPod, Apple needs a tiny, inexpensive hard drive.

Although Toshiba, Apple's current supplier, may not have the drive that's needed, the pre-Macworld rumor frenzy has uncovered two possible suppliers: Cornice and Hitachi.

If Apple has solved the hard drive problem, an inexpensive iPod could be waiting in the wings. I'll be surprised if it's offered for less than $149, but we'll see.

If the rumors are true, the new iPod is good news for Apple and bad news for any company that makes flash memory-based MP3 players. The real power of the iPod is the great user experience provided by Apple's iTunes software, and the one-click shopping experience offered by the iTunes Music Store. If Apple can put all that in a $99 or $149 package, the music buying landscape will shift considerably.