It doesn't take a rocket scientist to realize that Apple will want to position some product as a "value" model for the iPhone and so keeping a 4" iPhone product in circulation makes sense. It's hardly clever nor ground-breaking for an analyst to "predict" this product, and so its not newsworthy.
Exactly. I would still lean toward it not happening more than it happening... that is -- introducing a 3rd "flagship" iPhone that is smaller. Like I said back a page or 2, if it does happen, it'll be more like the 5c was -- a cheap alternative, aimed at budding markets or the market that has less disposable income for the "expensive" versions.
In my opinion, Apple made it clear with the 5c that they're interested in the untapped markets targeted by said device (I don't want to say "cheap" so I'll use your term "value" market).
They also made it clear with the 6 and 6 plus that they are focusing directly on their battle with Samsung and trying to take some of the phablet market share.
Put those things together and, unless they are changing directions, we still have a small, value-oriented, cheaper alternative iPhone just like we do now.