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Apple's (NASDAQ:AAPL) assault on the living room likely means the introduction of another Apple appliance or device and Apple TV is the best thing the Cupertino, California-based company can do.
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"We find it difficult to believe that the Apple TV is the best Apple can do," Jefferies analyst Peter Misek wrote in a note to clients.
Could it be a full 42" or larger TV?
Certainly there has been chatter for a new TV effectively integrating all set-top box functionality, console functionality, and Apple TV functionality into the TV set.
However, the analysts cannot seem to get over the margin structure of the TV business, which is significantly lower than any of Apple's existing businesses.
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Industry TV gross margins have averaged 5 percent to 20 percent with Japan electronics companies' operating margins in the 0 percent to 5 percent range for most of the last decade, Misek wrote.
In addition, the analyst believes Apple's intellectual property will be difficult to leverage directly in the construction of a TV.
However, the Misek is not ignoring the possibility of a simple TV from Apple.
"While a simple TV is certainly possible, we just believe Apple wants to do something completely different," Misek said.
Given Apple's historical preference to innovate a new category, there is wide anticipation that whether Apple's introduction of the iTV allows it to launch a premium-priced piece of hardware?
What to Expect in iTV?
Besides incorporating Apple TV-type functionality, Misek believes a full browsing experience potentially featuring an iPad, iPod Touch, or iPhone as remote control or input device is quite possible.
"We think Apple could provide an extremely elegant solution, effectively allowing the user to move content between the multiple screens," Misek added.
Additionally, the analyst believes Apple has learned much from having Netflix on the Apple TV and that Apple will try to improve on this model. But, the real question is how does Apple convince Hollywood and other content creators to license it?
