Apple is planning to launch a video-based “assault on the living room” that includes delivery of premium network content and other video offerings, according to Jefferies & Co. analyst Peter Misek. The analyst believes Apple will unveil a disruptive product and/or service to market that could bring both subscription revenue and new hardware sales to the company.
In a research note to clients covered by The International Business Times, Mr. Misek said that he spent the last several weeks checking with “developers and content providers,” and believes that Apple is negotiating with those content providers to bring content to its devices, and possibly to a new TV he dubbed “iTV.”
“We believe Apple is about to launch a new video-focused cloud-based service. In addition to subscription revenues, we think Apple could potentially benefit from a halo effect that increases units and average selling prices for its existing products and provides a foundation for the launch of an iTV-like device,” Mr. Misek wrote.
To that end, he believes Apple’s North Carolina data center is set to go live soon, if it hasn’t already, and he also wrote that he believes Apple is in the process of developing additional data centers in the U.S. and Europe.
He said that he found development plans for several such centers well under way, and that while he could not specifically trace them back to Apple, he found they were similar to the center Apple is building in North Carolina.
He believes that developing such a network of data centers will allow Apple to fully implement cloud-based services that will bring customers to its mobile products and keep them there, and that this will allow Apple to maintain a higher-than-expected average selling price (ASP) for its tablets and smartphones.
Steve Jobs and The One Last Thing
Mr. Misek believes that Apple CEO Steve Jobs is working on a “final hurrah” in his tenure at Apple before stepping aside. He thinks that Mr. Jobs wants to do to video and TV what he did to music (iTunes) and smartphones (iPhone), which is completely disrupt them by revolutionizing the industry.
“We would find it easy to believe that Steve Jobs’ final hurrah before turning the reins over would be to revolutionize video much in the same way Apple has transformed the mobile, computing, and music world,” Mr. Misek wrote. “It is also notable that his authorized biography is due in 2012.”
To that end, he thinks that Apple is negotiating directly with content providers to license their content for a streaming service being handled by its data centers.
“We find it notable that the content companies, citing a lack of domain license, asked Cablevision to remove channels from its iPad app,” he wrote. “We believe these same companies are negotiating some sort of deal with Apple.”
Apple could be planning to deliver this content to the living room via a new piece of hardware he called the iTV (he didn’t address why Apple wouldn’t simply use its existing hobby of the Apple TV to do so). The iTV would be an Apple-built TV that brings the Internet to the living room, but does so by using the iPad and iPhone as a remote control and input device.
He wrote, “We believe a full browsing experience potentially incorporating an iPad, iPod Touch, or iPhone as remote control or input device is very possible. We think Apple could provide an extremely elegant solution effectively allowing the user to move content between the multiple screens.”
Though he didn’t put it this way, Mr. Misek believes that Apple is going to be competing with both the cable companies and its own streaming partner, Netflix, and bring streaming subscription TV to the living room. Apple would take its usual 30% cut from subscription revenues, and reap additional hardware sales from existing products and what could be a new TV.
By The Numbers
To put numbers to all this, he upped his estimates for fiscal 2012 to a range of $150 billion to $171 billion in revenue, up from $134 billion. Consensus estimates currently have Apple at $118 billion for 2012. That makes Mr. Misek a raging bull, for those keeping score at home.
EPS for 2012 he is now estimating at $32 to $36 per share, up from his previous estimates of $28.50 per share and consensus estimates of $26 per share. He reiterated his “Buy” rating on the stock and a price target of $450.
Shares in Apple traded higher Tuesday. In the later afternoon session, shares were trading at $331.99, up $1.19 (+0.36%), on moderate volume.
*In the interest of full disclosure, the author holds a small share in AAPL stock that was not an influence in the creation of this article.