My article, "Apple's Next Big Idea: TV's, From Design To Distribution", detailed the possibility of Apple (AAPL) launching a television set in 2012. We have received more information that further confirms that an Apple TV launch is imminent. Digitimes is reporting that suppliers will begin preparing materials for an iTV in Q1 next year. It was also reported that Samsung (already started chip production for the iTV. The iTV is expected to launch late next year but I would not be surprised to see a delay and see it launched in mid 2013.
It's important that Apple lines up the content in order for the iTV to catch on. Apple has been running into issues in this regard. Apple has been facing tough resistance from content providers who want to stick with a bundled subscription model. U.S. cable operators are also working on a plan to force content providers to unbundle services. I expect the networks to eventually unbundle services and provide content on an a la carte basis. This reminds me of when networks resisted licensing content to online media companies like Hulu. The networks feared that online sources would damage their existing revenue streams. They quickly realized it was better to generate revenue by licensing content online since content would often make it online through illegal means anyway. The networks will be forced to adapt as consumers move to an a la carte model.
These are other points I like about the Apple story:
- Revenue for the most recent quarter was $28.3 billion, representing year-over-year growth of 39%. The year-over-year increase was fueled primarily by strong growth in iPad, Mac and iPhone sales. Apple is rumored to launch two new versions of its iPad line next year which should continue to grow revenue.
- Net income was $6.6 billion, increasing 54% year-over-year.
- iPhone saw an increase of 21% year-over-year in its last quarter. I expect the company to have an even bigger increase in the next quarter due to the launch of the iPhone 4S and the addition of Sprint (S) to its list of U.S. wireless carriers. I expect Apple to eventually add T-Mobile as well which should be a growth driver in the future.
I'm bullish on Apple and expect the new iTV to open a large new market for the company. The content subscription model will provide a nice steady stream of business for Apple. I will use pullbacks as opportunities to add to my position. I expect Apple to have a better than expected quarter when earnings are announced which should provide short term gains. Apple has continued to grow its business nicely and I don't see any reason why that would change.