This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Apple's Next Big Project (Update 1)

Updated from 9:04 a.m. to include thoughts about iWatch from Morgan Stanley.

NEW YORK (TheStreet) -- Apple (AAPL) 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), 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

>Contact by Email.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,031.03 -67.42 -0.39%
S&P 500 1,997.46 -5.91 -0.30%
NASDAQ 4,583.1820 +2.9110 0.06%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs