Will Apple Inc. Release an iTV in 2014? It's Looking Unlikely

Investors expecting Apple to revolutionize TV in 2014 should temper their expectations.

Mar 25, 2014 at 8:00PM

Apple (NASDAQ:AAPL) hasn't released a major new product in more than four years. Sure, there have been been plenty of revisions -- new features, faster processors, different screen sizes -- but nothing that fundamentally altered the tech landscape.

That was supposed to change this year. CEO Tim Cook has repeatedly promised new product categories in 2014. According to sell-side analysts, one of those products could be a revolutionary new Apple TV. If it takes the living room seriously in 2014, Apple could pressure existing players including Sony (NYSE:SNE) and even Comcast (NASDAQ:CMCSA).

But investors may need to temper their expectations. Recent reports have called Apple's television plans into question, suggesting that 2014 might not be as big for TV as investors had hoped.

Analysts have big expectations
For years, analysts have called for an Apple-made TV -- not just a revision to its current miniature set-top box, but a full-fledged, integrated television set. As imagined, this device would serve up paid-TV content in an entirely new way, perhaps including a revolutionary new interface and deep integration with Apple's Web services. This speculation has been fueled by comments from Cook and the late Steve Jobs, who told biographer Walter Isaacson several years ago that he had "cracked" the TV interface problem.

While it seems obvious that Apple is interested in the TV space, nothing definitive has emerged. Still, that hasn't stopped bullish analysts from factoring an Apple TV into their projections. Morgan Stanley argued more than a year ago that a forthcoming, $1,000+ Apple-made TV could boost company earnings per share by $4.50. More recently, Wedge Partners' Brian Blair included the TV in a list of other rumored Apple products that could elevate the stock by as much as 20%.

Apple will have to deal with the cable companies
But a revolutionary TV product in 2014 is starting to look less likely. According to The Wall Street Journal, Apple has only now entered preliminary talks with Comcast, which is soon to become the nation's largest paid-TV provider. Apple is reportedly working on a Web-based TV service, which it wants Comcast to distribute to its subscribers on a preferential basis.

While Comcast, perhaps looking to gain an edge over its satellite rivals, could decide to play ball with Apple, there are many reasons to remain skeptical. As I've previously noted, Comcast has been working to make itself a de facto Apple competitor, adding apps to its set-top boxes and selling movies and TV shows through the Xfinity media store. Even if it agrees to Apple's demands, it could take some time to make the necessary network enhancements.

The TV business is terrible
Meanwhile, Yukari Kane, in her new book Haunted Empire, reported that Steve Jobs had no interest in entering the TV market. According to Kane, Jobs characterized the business as "terrible," noting that TVs are at best a low-margin business, with infrequent sales.

Jobs' observation is undeniably spot-on: just consider what has happened to the Japanese giants that once dominated the TV business. Last year, much to the chagrin of enthusiasts, Panasonic shuttered its plasma TV business. Although Panasonic's models offered unparalleled picture quality, most consumers just weren't keen on shelling out thousands of dollars for the company's high-end sets.

The same is largely true for Sony, whose TV business has basically been unprofitable for most of the last decade, though the company has been a bit more stubborn in its efforts. Earlier this year, Sony put its TV business in a separate subsidiary, making it easier to spin off, sell, or even shutter should the segment continue to struggle.

Growth in the TV industry has come largely at the low end, with companies such as Vizio besting larger rivals like Sony by offering cheap, mostly Chinese-manufactured panels. As a company, Apple isn't known for targeting the low end, calling into question the possible success of an Apple-made TV set.

Expanding the ecosystem
What seems much more likely, at least in 2014, is a vastly improved Apple TV set-top box. Cook has referenced the growth in that part of Apple's business, and though the numbers still pale in comparison to the company's other segments, there's growing demand for smart TV solutions.

9to5Mac reported that the company was testing a new version of the Apple TV operating system, one that would open the device to third-party apps. This software would ship in a new box, but would also be available to existing owners of older models. Paired with a bluetooth controller, the Apple TV could emerge as a low-cost alternative to traditional video game consoles and could help Apple continue expanding its iTunes revenue. That could help Apple lock customers deeper into its ecosystem, particularly as Google and other rivals set their own sights on the living room. But it wouldn't be the sort of revolutionary product many seem to expect

Certainly, an expensive iTV in 2014 is still possible, but based on recent reports, investors should be skeptical.

A better investment than Apple?
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information