Sources close to Apple reportedly say that the company will release a large-screen iPod Touch device next fall, according to a Web-based blog that reviews Internet products and companies.

 

The Internet-ready touch-screen device – a major winner in Christmas sales – will feature a seven or nine-inch screen, and prototypes already have been seen, according to TechCrunch Co-editor Michael Arrington.

 

“Apple (News - Alert) has been experimenting internally with large form tablet devices for years, one source says, but there was concern that users wouldn’t like the device,” Harrington writes. “The difference now is the iTunes app store, which has thousands of games and other applications that are perfect for a touch screen device with an accelerometer. Apple says more than 300 million applications have been downloaded since the App Store launched in July 2008.”

 

The notion of a larger-screen iPod Touch has been floating around for a while.

 

In one recent article, Fortune’s Dan Frommer said that a larger iPod Touch HD in the $500 to $600 range would be a big hit and compete against so-called “netbook” laptops.

 

The iPod Touch saw a major spike in Christmas Day sales, Frommer reports, as the device’s market share soared to .21 percent, a fourfold increase from its mid-December share of the Web browser device market.

 

“Meanwhile, we got 2.66 percent of our visits from iPod touch users yesterday, up from 2.00 percent on Christmas Day and a 0.32 percent average from Dec. 1 to 24, according to Google (News - Alert) analytics,” Frommer said.

 

As CNet’s Steven Musil reports, Apple CEO Steve Jobs (News - Alert) earlier this year hinted that the company was looking at small-device categories, but shot down talk of an Apple competitor to Amazon’s Kindle.

 

“However, tablet PCs in the Windows world haven’t sold very well, and the concept has almost completely fallen off the radar screen of the PC industry,” Musil writes.

 

Meanwhile, Harrington said his sources offered no information on the potential device’s pricing. The iPod Touch starts at $229 now, and the 32 GB model goes for $399.

 

“Apple rumors, particularly Apple tablet rumors , tend to come and go,” Harrington said. “I’m not saying Apple is definitely launching a large form iPod Touch. But sources I trust are saying they are currently planning to, and one source has actually held the device.”