Editor's note: This is the second excerpt of an e-book on Apple by Jason Schwarz, an analyst at Lone Peak Asset Management in Westlake Village, Calif. Part 1 appeared Monday.

The fundamental purpose of Apple's ( AAPL) mission is about to change. Building products that utilize the App Store is the biggest money-making opportunity in tech. The key to Apple innovation will be to figure out how to effectively merge multiple functions onto a single device, just as the company did with the iPhone. Right now, the popular phrase in commercials is "there's an app for that." Soon that phrase will evolve into "there's a device for that."

Apple's competitors are working overtime to get their piece of the mobile Web. Google ( GOOG) is following the Microsoft ( MSFT) model of the 1990s by touting the openness of Android. Will open beat out the closed Apple model once again? I don't think so.

Technology has grown so intricate that consumers rely on seamless integration to overcome the complexities. Seamless integration does not happen when various companies try to mix and match their solutions.

Look at what is required to download the latest versions of Microsoft operating systems. The average Joe can't do it. His old hardware won't support the new stuff, and if it does, then he's dealing with software that doesn't support it. Apple upgrades are, I'm going to use that word again, seamless. The closed ecosystem fills the need of modern technology.
Apple UWS
Apple's approach to the future: seamless technological integration.

Here is one of my 10 projections for Apple's future in decade 2010:

Apple Projection No. 4

Most suppose that Apple TV is made for movies. I think digital movie distribution is a business that Steve Jobs wants little to do with. It's a novelty. There doesn't seem to be any consumer need in the area. Anyone who would own an Apple TV already has access to Netflix ( NFLX) or pay-per-view.

Because of this, the current version of Apple TV has not caught on. While the movie content and the television content are fundamental necessities for the product, the real driver of differentiation will be App Store access from your TV.

In line with the Apple way of doing things, I predict that the new version of Apple TV will in fact be an Apple brand flat-screen television. People initially laughed when Apple announced that it was going to make a phone; those same people won't be laughing when Apple announces that it is actually going to make a television.

By building a television, Apple will continue the trend of seamless integration of the iTunes platform into our lives. This is the product that can once and for all dominate the digital living room. Apple TV is a logical next step in the evolution of the App Store. First, we used apps on the iPhone and iPod Touch, next we will use apps on the Tablet, and finally we will use apps on a television. With a built-in 3G or WiFi Internet connection, there will be an opportunity to change the perception of what a TV is.

An example of the capability of Apple TV comes from MLB.com's app, called the At Bat Application. Owners of the application get to watch any pro baseball game of their choice. Games are even edited to show only those pitches that resulted in a hit, so that full games can be viewed in fewer than 20 minutes.

This capability could be a huge boost for the popularity of baseball. The application also has DVR features, so users can pause and rewind live games from their devices. It's cool to use this app on an iPhone, but how much better would it be to use it on a big screen? Apple TV will take this successful mobile platform into our living rooms.

Another benefit of having an Internet connection built into your television is that the screen now becomes a two-way device instead of one way. A two-way device opens up the possibility of increased interaction with not only games, but with movies and television shows as well.

Imagine being able to choose alternate endings for your favorite show, or choosing to follow one character's perspective over another. The entertainment value goes up. Or how about being able to select which camera angle you use to view a football game? If you'd like to focus on the offensive and defensive lines you can do that. If you'd rather watch the game from your favorite receiver's perspective, you can do that.

I see my busy wife, who wishes she had more time to catch up with her friends, being able to sit down and watch her favorite show ( So You Think You Can Dance) with her friends. Only her friends won't be in the same room as her. They don't even have to be in the same state. They'll be able to use a platform like Facebook, Twitter or even a video-conferencing tool like iChat to converse during the show.

When each living room has a connected television, it will allow friends to share in the same entertainment. Show like Fox's American Idol that rely on fan votes will upgrade to real-time voting systems through Internet TV.

New shows will be developed to take advantage of the audience interaction. Your living room will become a much more exciting place. Enjoy following Jeopardy? Soon you'll be an actual competitor with the chance to win the big money right from your own home.
At the time of publication, Schwarz was long Apple.

Jason Schwarz is an option strategist for Lone Peak Asset Management in Westlake Village, Calif. He is also the founder of the popular investment newsletter available at www.economictiming.com. Over the past few years, Schwarz has gained acclaim for his market calls on the price of oil, Bank of America, Apple, E*Trade, and his precision investing in S&P 500 option LEAPS. His book, The Alpha Hunter, is set to be released by McGraw Hill in December 2009.