Apple iPanel TV Release: Put Up Or Shut Up

| About: Apple Inc. (AAPL)

It's gut check time in Cupertino. The eerie silence from Apple (NASDAQ: AAPL) headquarters will only add more fuel to the iPanel fire, as analysts, investors, and fan boys monitor the corporation's every move. For several years, tech aficionados and ambitious journalists have woven tales of insider "sources" who have confirmed that an Apple flat panel television is in the works. Although largely unsubstantiated, the rumor mongering simply makes perfect sense, as the iPanel would logically represent another hub for Apple's suite of products. Quite frankly, the iPanel will be Apple's most important product launch since the McIntosh.

Steve Jobs is Gone

Steve Jobs, Bless his heart, is gone, and will never physically walk through his Apple campus doors again. Jobs' spirit, however, will always live on at Apple in some fashion, as his company remains the personification of counter-culture. Since Jobs' death, Tim Cook has emerged as the face of Apple, and he has enjoyed the fruits of a $575 share price and $567 billion market capitalization during his short tenure in the catbird seat. Irrespective of any elevator ride to the top, Cook's nuts-and-bolts persona will forever be measured against the footprints of a creative genius. The iPanel will prove whether Cook is capable of transitioning from his substitute teacher role and into a true visionary who may also put a stamp on this company.

Certainly, Apple watchers will leaf through Walter Isaacson's Steve Jobs biography for iPanel release clues. Isaacson, however, has already admitted to omitting trade secret information from Jobs' last pet project. Upon the unveiling of the iPanel, onlookers will pore over every detail to calculate the number of Jobs fingerprints that remain on the machine. I must speculate that Apple brass, engineers, and designers will be highly motivated to deliver quality product - and prove that the success of their A-Player corporation is more than just the work of Steve Jobs.

Showmanship, however, will be lacking. Steve Jobs was the ultimate salesman, who clearly reveled in over-the-top presentations, cult followings, and mass supply-chain shortages that sparked an Apple Store nightclub atmosphere. Cook, an operations man by trade, will be unable to wrap his head around the appeal of "cool" and the spectacle of humanity wanting what we can't have. I already miss Steve Jobs in his black turtleneck, who would order us to consume what we thought we would never need.

A Consumer Electronics Hub

According to Jefferies & Co.'s Peter Misek, Apple fan boys can expect the iPanel to dominate the home theatre experience. It is likely that this television will be able to log on to the Web, feature touch-screen technology, allow for Siri voice commands, and facilitate video conferencing. As a hub, the iPanel will accommodate connectivity into Apple's closed suite of iMac, iPod, iPhone and iPad offerings. Yet again, Apple will leverage its halo effect to drive additional sales in content, telecommunications, computing, music and entertainment.

I think that the iPanel will be the latest must-have for hipsters, who will be able to rig their dee-jay set-up to television graphics alongside a Mac Book running Pro Tools. Alternatively, business professionals will delight in putting together interactive presentations through the Apple iPanel circuit to impress clients. Similar to all successful technologies, the iPanel will be a sleek toy that we will somehow be unable to live without.

Apple's Bottom Line

I am going to project that the Apple iPanel is set for Q4 2012 release - in perfect time for Holiday shopping.

The iPanel is likely to come in 32-inch, 40-inch, and 46-inch sizes. Although Apple reports 41-percent gross margins on its income statement, I would target 35-percent gross margins on these big-ticket items. 35-percent gross margins are also slightly above those for the Google (NASDAQ:GOOG) - Samsung (OTC:SSNLF) partnership in smart televisions. Right now, the latest Samsung 46-inch 1080p smart television retails for $2,999.99 at Best Buy.

For câché, I am setting an opening day price range of $2,500 - $3,000 for the Apple iPanel. Going forward, Apple will slash prices into the $1,500 - $2,000 price range during 2013. My estimates take into account the fact that Apple never shirks away from higher costs of goods sold - in order to deliver quality over and above that of the competition. For many, a $3,000 television will be yet another caricature of me-first American consumer greed, corporate arrogance, and the mark of a flop. I would argue, however, that high prices identify the je ne sais quoi that is Apple. Remember, Apple set up shop with its $600 iPhone in 2007. The outrageous original price tag only added to the phone's allure with the first-mover debutante set and highlighted a feeding frenzy to own the product.

Research firm IHS projects total shipments of roughly 35 million flat panel units between the 2012 and 2013 calendar years. I would expect Apple to garner a 5-percent share of this market over the course of 2013, which would translate into 1.75 million iPanels sold. At an average price of $2,000, we can conservatively anticipate $3.5 billion in iPanel revenue for Apple. The $3.5 billion in revenue should trickle down to $1 billion in additional net income and $1.10 worth of earnings per share for 2013. For the sake of comparison, Apple posted $26 billion in net income ($28 EPS) on $109 billion 2011 revenue.

Between 2007 and 2011, Apple grew earnings at a 65-percent average annual clip, but trades at a lower multiple to Proctor and Gamble (17 to 19 p/e). Apple's $575 share price is also made up of $100 worth of cold, hard cash. This stock is cheap, and I must argue that the looming iPanel launch is therefore immaterial to near-term Apple stock market performance.

Over the long term, however, an absolute iPanel flop (1-percent share in flat panel market) could very well signal the beginning of the end for Apple as a story stock. We would then mark time until Apple's suite of products reach market saturation and trade shares as if we were in the market for a stable utility play that mints obscene levels of cash and kicks out dividends.

Bill Gates and Microsoft (NASDAQ:MSFT) would sympathize.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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