Apple's TV prospects are moving to the front of the analyst chatter again---talk surfaces almost quarterly---and signals once again point to a big living room move.
Piper Jaffray analyst Gene Munster said in a research note that it appears that Apple will replace its Apple TV set-top box will a real TV. Signs pointing to Apple TVs are:
- Patents in May and January for TV broadcast menus and other technology.
- iCloud makes media storage easier and could be the enabler of Apple TVs. It's not a big leap to add a TV to the slide to the right.
- Apple has prepaid for components (likely for displays).
- An App Store for TV is likely should these efforts launch in late 2012.
While Apple's commitment to the living room remains a "hobby," we continue to believe the company will enter the TV market with a full focus, as an all-in-one Apple television could move the needle when connected TVs proliferate. We estimate that of the 220m flat panel TVs sold in 2012, 48% or 106m units will be internet-connected, of which Apple could sell 1.4m units. We believe an Apple Television could add $2.5b or 2% to revenue in CY12, $4.0b or 3% in CY13 and $6.0b in CY14.
The idea is plausible and it's not a stretch to see Apple moving into the connected living room in a big way. Munster has been championing the Apple TV cause for months.
But there is another other side of the TV story.
Barclays analysts Ben Reitzes on Friday penned a long research note about Apple's prospects. Apple shares have generally lagged rivals and the broader market in recent months. Part of the problem: There may not be a "next big thing."
One of the most attractive things about investing in the Apple story since about 2005 has been that it was pretty easy to envision the “Next Big Thing” – i.e., phones or a “big iPod Touch” were easy guesses. We didn’t know how the specifications would look or all the details, but you get the idea. Now there are camps that think the next big thing after the iPad is now an integrated TV system – and some who think there isn’t anything. We think the next big thing is really a combination of China (the next US or bigger?) and increasing the utility of the iPhone with 4G connectivity – creating the next “mega upgrade cycle” (usability that fuels 200 million units/year like volumes) – we think Apple is laying the foundation for this type of cycle to start in mid-CY12 with new partners in China and new iPhone products. We are hesitant to say it is TVs given the issues of having cable companies involved. Perhaps TVs running iOS and Apple TV software are coming in the near future, but we just can’t nail down the impact and are uneasy about anointing TVs as the next big thing. We believe the biggest opportunities for Apple moving forward include the enterprise opportunity and China.
The funny part here is that China and the enterprise are the keys to Apple's revenue and earnings growth. The problem is that those categories aren't all that sexy. Apple 50-inch TVs capture the imagination a bit more. As far as real business returns though, enterprise and China look way more fulfilling.