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September 12, 2006

New Products Due Today From Apple

Sometime later today, Apple will unveil its long awaited new products and services. Consensus seems firmly to predict that new higher capacity iPod nanos with new outside covers will be introduced. Consensus has also coalesced around the launch of an iTunes movie store. The remaining question is what else might be coming. The invitation apparently uses the “and one more thing” language which in the past has been a tip that something big is coming. Speculation has surrounded a true video iPod, a cellphone or PDA, and a piece of hardware that enables videos, TV shows, and movies purchased from iTunes to be played on your TV.

The best informed speculation I read was on AppleInsider.com in an article which contained this nugget:

” Just as he asserted that consumers are more eager to own their music tracks for 99 cents a piece rather than rent them on a monthly basis, he realizes that few are willing to plunk down ten bucks for a two-hour movie that they'll have to watch with their neck cranked towards a miniature screen resting in the palm of their hand. As someone at the forefront of the motion picture industry, he knows films are designed for the big screen and later adapted for the home living-room theater.

For these reasons, Jobs many months ago commissioned an elite group of Apple engineers to get the ball rolling on an intuitive hardware solution that would more closely tie the company's digital media strategy to the living-room. And so AppleInsider has been told, Apple has been quietly developing a video streaming device that will interface with an updated version of its iTunes jukebox software.”

If such a product were introduced that COULD BE big but only if the solution is SIMPLE. I’ve been speculating for over a year that Jobs real goal was the living/family room.....

Apple already has a huge growth opportunity by gaining market share in PCs or by introducing a cellphone or PDA. Both of thse markets are enormous and dwarf the annual market for iPod music players. Just 1% market share in those markets is billions of dollars in annual revenue. If the living/family room is opened up with each households thousands of dollars of investment in TVs and stereo, Apple could not only sell products for that market but could also reinforce its market share gains in PCs and maybe even next generation PDAs.

I suspect that “one more thing” will address this PC/TV convergence. And the opportunity is huge is Apple can offer a SIMPLE solution. I mean really SIMPLE. Right now, the iTunes broadband connection is coming into the home from a phone or cable jack that is very often not situated anywhere near the primary TV. The problem in search of a SIMPLE solution is how to get the video downloaded from iTunes over to the TV. It seems that wireless is the only way and Apple already has Airport Express as a solution to build upon. Will the MacMini be reworked into a receiving device that attaches to the TV and receives a wireless feed from an iTunes enables computer somewhere else in the house?

I am not a tech person so I don’t know the answer but I do know the opportunity for Apple is huge and I know that to really capture a mass market opportunity the solution has to be simple, like iPod + iTunes.

I’d encourage you to read the comments section of the AppleInsider.com post linked above and read the comments in this post as well.

As for Apple stock, it has had a good run so today’s announcements already build in something special. Anything short of special seems likely to lead to a sell-off. But if a sell-off comes keep your eye on the big picture….billions and billions in high margin revenue from the computer, cell phone, and digital home markets. This where the second leg of the Apple story has always been and this is the lens through which today’s product introductions should be viewed.

Posted by Steve Birenberg at September 12, 2006 09:09 AM in AAPL