Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Does This News Kill a Possible Apple iTV?

By Andrew Tonner - Mar 23, 2014 at 12:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Recent rumors, and a bit of math, suggest Apple’s iTV rumors might never materialize.

Apple's ( AAPL -1.17% ) future product lines are always a matter of great interest for a few reasons. For starters, as one of the most forward-thinking companies in tech, Apple holds a certain role of taste maker du jour for much of the consumer electronics industry (case in point here, or here). Beyond that, Apple's highly controlled product development and launch tactics are, like it or not, to get as many people talking about what Apple will do or has just done (case in point, this article).

As flagging growth concerns have hampered Apple's shares in the past two years, the company's CEO, Tim Cook, has stated publicly that the world's largest tech company will launch at least one new product line in 2014. Keeping the above intro in mind, this has, as you might expect, driven many of us in the media and finance community to speculate as to exactly what product(s) Apple has up its sleeve.

For a number of reasons I won't get into here, an advanced smartwatch seems like the most sensible bet as the next addition to Apple's product portfolio. However, the possibility of Apple releasing its own dedicated smart TV, colloquially the iTV, has also garnered ample attention, as well.

However, one recent report shot down the notion of the iTV, and that, as it turns out, might be a very good thing for Apple and its shareholders.

iTV: Gone before it even got here?
Former Wall Street Journal tech reporter Yukari Iwatani Kane has been generating plenty of buzz for her recently released book chronicling Apple in the post-Steve Jobs era, some of which, if true, is highly relevant to understanding Apple's product pipeline.

According to Kane, Steve Jobs responded a flat "no" when he was asked by a top employee whether or not Apple planned on releasing its own software-integrated HD television set, or the iTV. The late Apple co-founder and CEO then went on to note exactly why that would be the case: "They don't turn over and the margins suck." 

This storyline seems a bit at odds with Walter Isaacson's authorized autobiography on Jobs, in which Jobs was reported to have famously claimed he'd finally devised a solution, or "cracked the code" for Apple in the television market. Many, myself included, took this to mean that Apple would eventually enter a market that many still see as ripe for improvement.

However, fast forward to today, and we're still without a full-scale iTV. Maybe it's time to take a hint...

Good idea, terrible industry
If we're trusting Kane's reporting, Apple electing to not enter the TV market could be both a blessing and a curse for Apple investors.

In a negative sense, this certainly precludes Apple from pushing into a sizable revenue growth opportunity. Apple's shares have lagged the broad market in the past year or so, in no small part because of concerns about the company's growth. Not moving into another multibillion market certainly won't help quell those concerns, which could keep Apple trading at compressed multiples.

However, on the other hand, an Apple smart TV certainly could have done more financial harm than good. As the Jobs quote above also references, the global TV market's economics, in all honesty, well, suck. Generally speaking, televisions are low margin, long-lived devices that still must deal with rapid technological change. It's a recipe for financial trouble waiting to happen, which is why even the world's largest players in the space can struggle to break even.

And for those keeping score at home, just breaking even isn't Apple's usual forte. But from the looks of it, Apple is already shifting its sights to a far better opportunity in the emerging smartwatch space. This is  another multi-billion dollar market with vastly superior margins than the television space; therefore, gravitating toward the smartwatch market seems an eminently more ideal use of Apple's resources than developing a smart iTV.

The day may come when Apple acts otherwise. Only time will tell. However, from what we know right now, Apple appears to be in a sound place to make good on its promise of launching at least one new product this year, which should ultimately be music to its investors' ears.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
AAPL
$161.84 (-1.17%) $-1.92

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
624%
 
S&P 500 Returns
141%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/04/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.