Apple Computer could be on the verge of debuting a digital media hub, a new series of photo-capable and multimedia iPods and a movie download service much like the iTunes music service, analysts with the investment firm UBS Investment Research reported Tuesday.

Analysts Jeff Brickman and Ben Reitzes said sources connected with component manufacturers had given them strong indications of a new and bolder direction for Apple as it tries to maintain its dominance in portable, digital media devices.

"As evidenced by the iPod Photo, we believe iTunes can be expanded not only to manage digital photo libraries, but also video or movie downloads with even a video service emulating the iTunes Music Store," the analysts said in a report obtained by The Mac Observer. "As a result, we believe an expanded and free iTunes download represents a iTrojan Horsei into Windows-based PC’s, expanding Apple’s appeal further and creating more switchers over time."

The analysts made a case for Apple expanding the capability of the iPod into much broader groups, such as photos and video in an effort to persuade consumers that the iPod is much more than a music player.

"Apple continues to build-out its imaging ecosystem in a similar fashion as with what the company was able to accomplish with music," the report said.

Mr. Brickman and Mr. Reitzes said they believe Apple will ultimately release a sub-$500 multimedia-ready iPod sometime in 2006 as it carefully watches the interest in cheaper video games devices.

"Reports suggest that Apple is likely watching the reception for the video features in Sony’s PSP very carefully," the analysts said.

Unlike the PSP, the analysts predicted a similar iPod device would have an internal hard drive with about 60 gigabytes of storage along with a color display.

As for content of a new multimedia device, the analysts believe that will come in the form of a iTunes-like media service where consumers would download movies and videos for a fee.

"We believe that real success for a video/movie capable iPod may need to come in conjunction with a new download service from Apple, that can easily put content into the device," UBS said. "Apple may be able to build upon its experience with iTunes to create a comparable service for motion content...Steve Jobs may be one of the few industry executives that may be able to pull off an agreement that would be palatable to both the movie and consumer electronics industry."

UBS said such a service could be up and online by "the end of 2006."

The UBS analysts also predicted an Apple digital media hub for the home is inevitable, probably by years end, that would store music, photos, videos and more and share that content both over a cable and wirelessly to a variety of devices.

"Itis increasingly likely Apple will focus on becoming the center of the idigital home," the analysts wrote.

UBS said that while the cellular phone market could be a licensing fee winner for Apple, the company must be cautious and aggressive in developing persuasive products that convince consumers that playing music on a standalone portable player is a better option than on a combination mobile phone/MP3 player.

"We believe that it is more likely Apple is trying to figure out how to make a wireless iPod (possibly using WiFi) to download music on the fly. This type of wireless iPod device is likely still on the drafting table, but could become a reality by the end of next year in our view."

UBS estimates that Apple will earn 23 cents per share, or US$3.2 billion, in the current quarter on revenue growth of 67% year-over-year. While cautioning the estimate is "conservative," the analysts suggested real results could be slightly higher when the company reports fiscal second-quarter results on April 13. UBS is maintaining a "Buy" rating on Apple with a price target of $50 a share.