Can Apple Be a TV Winner?

Apple (NASDAQ:AAPL) has been surrounded by a ring of doubt recently, with questions about its ability to keep innovating and maintain long-term growth prospects eating away at its share price. Some say that a television product, which has been rumored for a few months to be soon entering Apple’s product arsenal, may prove to be a worthy catalyst.

According to Rich Tullo, the director of research at Albert Fried & Co., such a product was on its way and may prove a big threat to Netflix (NASDAQ:NFLX).

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“We think Apple may enter the next generation TV market with a large panel retina display supported by iCloud,” Tullo tells MarketWatch. “If Apple rolls out a next generation TV it is likely [it] will support the product with the iCloud, its natural match. We think Apple could disrupt Netflix and get the industry buying, and make the current exclusive rights streaming rights controlled by Netflix useless.”

UBS analyst Steve Milunovich, who has a Buy rating and a $700 price target on the iPhone maker’s stock, believes that while it may be difficult for Apple to get content rights or enter retail stores with a large device such as a full-fledged TV, the company will figure out a new category, as it often does. “We don’t know what the company has in store, but we like its approach of looking for ‘the job to be done’ in Christensen nomenclature, thinking from the consumer need back to the product,” Milunovich writes in a note to clients.

“Media management, which may or may not require selling TVs, would seem to be a ripe area even if Apple is limited in its content manipulation,” he adds. “One issue with TVs is that the retail stores aren’t easy to adapt to selling them due to space constraints. Apple often creates new categories around interface breakthroughs, such as the graphical interface for the Mac, the wheel for the iPod, and touch for the iPhone. Better voice, gestures, and facial recognition might be next.”

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The UBS analyst also thinks that Apple chief executive Tim Cook is wrongfully under fire for the innovation question. According to Milunovich, Cook’s strengths in other areas that Apple needs to fix will be of value. The Apple CEO has valuable expertise in addressing supply-chain challenges and has “different strengths” from late cofounder Steve Jobs, “such as willingness to return cash to shareholders,” the analyst says.

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