Merrill Lynch looks to 'killer' Apple home media server

The Mac maker a likely winner in the digital living room

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Apple's next "killer" product could be a home entertainment system, investment house Merrill Lynch has claimed.

In a report issued to investors earlier this week, the company announces its belief that it's just too early in the game to forecast a winner on the digital living room fight. However, one thing of which ML is certain, it's not going to a PC.

"It's premature to know which (if any) device will become the centrepiece of the digital family room of the future," the firm said. "Still, we doubt that PCs - even Media Center PCs - will win because they are too complex and unstable. It strikes us as more likely that either (1) the game console will move up market to become the leading device or (2) a new system we dub the entertainment server will be created."

That's not to rule Microsoft out of the game, however. "We see a window of opportunity for Microsoft if it can introduce Xbox 2 mid-next year and have the holiday season to itself before Sony's PS3 hits the market," ML said.

"If the PC loses out to the game console or entertainment server, there will be winners and losers," it added, nominating Apple among the former category if it builds on the success of the iPod with a server system.

"A 200GB Apple server at a reasonable price and possibly with PVR technology could be Apple's next category killer," the firm said.

Apple is certainly edging in that direction. Its AirPort Express product, for example, allows a wireless enabled Mac or PC to serve music around the home. But it's a cross-platform product and doesn't specifically set the iMac at the centre of the home. There's the issue of the missing remote control, for starters - you need to control what's played from the server - and Apple doesn't yet offer the PVR system ML mentions.

But Apple's Xserve shows that the company can design slimline systems the could easily be adapted to provide the kind of consumer-oriented entertainment rig ML is talking about. And the mysterious 'handheld computer' appliance the company patented earlier this year may indicate Apple's interest in the networked home.

ML this week raised its forecast for Apple's financial performance in the current quarter, the Mac maker's first of fiscal 2005. It said it expects the company to ship 4m iPods in the three months to 31 December, up from its previous forecast of 3.5m units. For the fiscal year as a whole, ML reckons Apple will ship 12.9m iPods, 20.6 per cent higher than its previous FY2005 forecast of 10.7m units.

Part of that will come from the Flash-based iPod ML and other investment houses are now claiming Apple will offer early in calendar 2005. ®

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