Apple Wisely Ditches Plans for a 4K Apple TV (AAPL)

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Those who have spent the past five years waiting for the long-rumored premium TV from Apple Inc. (NASDAQ:AAPL) can finally exhale.

AAPL abandoned Apple TV 4KTV
Source: Apple

No, we’re not getting a 4KTV adorned with the familiar white logo soon. In fact, we may never get it. The Wall Street Journal ran a story over the weekend claiming that AAPL had killed its plans for a premium Apple TV.

Even the most fervent believer has apparently conceded that that Apple isn’t prepping a television for imminent release. CNBC reports that Piper Jaffray analyst Gene Munster — someone who has insisted since 2010 that Apple has a television in the pipeline — has conceded the point, saying:

“This is a tough day for me. It’s a hard reality to accept, and I think that is the reality of it: the TV is on hold.”

The Apple TV Is Dead

The WSJ article didn’t just say the company was no longer working on an Apple-branded flatscreen. It confirmed speculation that there had been Apple TV sets under development for the past decade.

The project was apparently abandoned over a year ago, after AAPL concluded any extras it could add to the TV experience — Siri voice control, iTunes streaming content or apps, for example — wouldn’t be sufficient to set an Apple 4KTV apart in a crowded and cut-throat market.

So … Will this news be a blow to Apple stock? Will investors panic at the thought that AAPL has given up on what would have been a very high profile new product?

There’s also fact that an Apple TV  has been widely reported to have been the final project late Apple CEO Steve Jobs was personally involved in. A move to kill something with that historical aura around it carries PR risks.

But the truth is that, if anything, the company will be stronger without releasing its own TV set.

If there’s one consumer electronics product responsible for more red ink than any other over the past decade, it’s TVs. When they make a profit, most TV makers have to make do with single-digit margins. If you think that producing premium quality sets that videophiles would be willing to pay extra for would be Apple’s ticket to making money, the odds are stacked against it.

Sony (NYSE:SNE) has been losing money selling TVs for the better part of a decade, despite a reputation for offering premium sets. Panasonic (OTCMKTS:PCRFY), renowned for its flagship plasma TV business announced it was shutting it down in 2013. Pioneer (OTCMKTS:PNCOF) — another brand once highly respected by video enthusiasts — sold its last TV in 2010.

Even 4KTV hasn’t been able to reverse declining TV prices. Despite companies like Samsung (OTCMKTS:SSNLF) showing off $50k+ Ultra HDTVs at the Consumer Electronics Show for the past few years, prices for flat panel TVs continues to slide.

Chinese manufacturers are flooding retailers with ultra-cheap Ultra HD TV sets, dropping the average selling price for a flat panel in 2014 to less than $500 — one third of what they were going for a decade ago.

Apple fans may be upset, and investors who were looking for AAPL to expand into new product lines might be disappointed. But in this case, pulling the plug on 10 years of R&D instead of following through with the release of an Apple TV set was the right call.

Besides, a great deal has changed in the living room since the project started.

Apple Stock Will Be Better Off Without the Apple TV

Despite technological advances like 4KTV, flat panels are more of a commodity product than ever. During that time, it has also become clear that consumers are just as happy — if not happier — to expand the capabilities of a basic TV by plugging in a set-top streaming box instead of buying a smart TV. That way, they can keep the TV and simply swap out boxes for new features instead of having to upgrade.

And despite losing market share to newcomers like Google’s (NASDAQ:GOOG,NASDAQ:GOOGL) Chomecast and the Amazon (NASDAQ:AMZN) Fire TV, AAPL was an early leader with the Apple TV, a plug-in streaming box it began selling in 2007. Since then, the company has sold more than 25 million sets.

A new version of the iOS-powered Apple TV box is expected in June, and AAPL could easily incorporate features it had been working on for its television set. We could see Siri voice control, gaming (taking advantage of all those iOS apps written for iPads, iPhones and iPods) plus streaming content that could go so far as to take on Netflix (NASDAQ:NFLX).

These features would be offered in a device that’s affordable enough for virtually anyone — many homes currently have multiple Apple TVs — that would likely offer margins far better than a 4KTV, cost a fraction of the amount to ship and take up little space in Apple Store showrooms.

Bottom Line for AAPL Stock

Not everyone is convinced that an Apple television is truly dead. The WSJ piece says AAPL investor Carl Icahn remains convinced we’ll see a 4KTV with the Apple logo priced at $1,500 in 2016, but he’s very much in the minority now.

Of course, Apple itself is mum on the topic — as usual — but it seems likely those Apple 4KTV prototypes will never see the light of day. Frankly, that’s probably a good thing for AAPL, Apple fans and Apple stock.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

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Brad Moon has been writing for InvestorPlace.com since 2012. He also writes about stocks for Kiplinger and has been a senior contributor focusing on consumer technology for Forbes since 2015.


Article printed from InvestorPlace Media, https://investorplace.com/2015/05/aapl-ditches-apple-tv/.

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