Updated from 9:04 a.m. to include thoughts about iWatch from Morgan Stanley.
NEW YORK (TheStreet) -- Apple (AAPL - Get Report) delivers a tremendous amount of content right to your fingertips, via iTunes, the App Store and iCloud. With that delivery comes a big expense in terms of wait time. But it looks as if Apple is working on cutting that down sharply.
In a report from The Wall Street Journal, Apple is reportedly working on building out its own infrastructure to deliver content straight to consumers, instead of having to go through third-party middlemen, like Akamai Networks (AKAM - Get Report), a content delivery network (CDN). This would make the experience of delivering content to consumers more seamless, and could be a hint at Apple's future plans, especially if it moves into the long-awaited television market with the oft-rumored Apple television set.
Though Apple has not announced its own television set, it has continued to build out its own set-top box Apple TV. Apple TV is also getting a more prominent space on Apple's Web site. It now has its own section on the Apple Store, along with accessories to go for it. Prior to that, it was buried in the iPod section.
In recent months, Apple has added several content partners for its Apple TV se- top box, which costs $99. Apple has added partners such as HBO Go, owned by Time Warner (TWX), and WatchESPN from Disney (DIS). In its most recent deal, Apple TV is adding World Wrestling Entertainment's (WWE) new WWE Network, once the network goes live Feb. 24.
Apple has continued to build out its iCloud service by expanding the number of data centers it has around the country, including ones in North Carolina and Prineville, Ore., which the company is still building.
It's also possible that Apple is expanding its Internet infrastructure as it begins to get ready for the iWatch, which is set to debut later this year. Morgan Stanley analyst Katy Huberty believes the iWatch could generate as much as $17.5 billion in revenue for Apple, selling for $299 per watch. Apple's "guidance for $10.45B of capital expenditures (non-cash and excluding retail stores) for FY14, which Apple just reaffirmed in the latest 10-Q, is up 32% from $7.9B in FY13. We believe this is an indication that Apple is investing in new product categories as single-digit iPhone and iPad growth no longer demands significant increases in capital expenditures," Huberty penned in the note.
Cloud services have become big land grabs for companies like Google (GOOG), Facebook (FB) and Amazon (AMZN), as they seek to own and take more control over the content they distribute to consumers. Apple appears to be headed in this direction as well.
Apple could not be immediately reached for comment for this story.
CEO Timothy D. Cook has hinted in the past that Apple is about more than its popular hardware, be it the iPhone or the iPad, and can deliver value to shareholders using its software and services. "Because we're not a hardware company, we have other ways to make money and reward shareholders," Cook said at a February 2013 investor conference. Apple has made exorbitant amounts of money from its software and services. In its most recent quarter, Apple generated $4.4 billion in revenue from its iTunes/Software/Services segment, up 19% year over year.
By building out its own Internet infrastructure and CDN, Apple is preparing for something big, most likely television. In a late 2012 interview with NBC's Brian Williams, Cook said television is "an area of intense interest" for Apple, but couldn't allude to anything more. "When I go into my living room and turn on the TV, I feel like I have gone backwards in time by 20 to 30 years," Cook told Williams at the end of the interview. "It's an area of intense interest. I can't say more than that."
-- Written by Chris Ciaccia in New York
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