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Wednesday, September 13, 2006, 04:30 pm

Apple's living room strategy a multi-year venture

By AppleInsider Staff

Apple Computer's recently introduced iTunes movie store and iTV streaming media hub are just the start of what will be a multi-year assault aimed at capturing the living room, says PiperJaffray analyst Gene Munster.

"This service and product are the first in what will be a multiple year strategy by Apple to target the living room as a new leg to the growth story," he told investors on Wednesday. "We consider the living room as one of the key, untapped consumer electronics markets."

With its more than 50 million iTunes users, Munster believes Apple maintains the pole position to convert or up-sell iTunes users into living room customers, fueling additional hardware and digital media purchases.

"While the impact to numbers won't start until the March quarter of 2007, we consider the move into the living room as significant given it represents Apple's third major addressable market," he said. "In the 1980-90s Apple was a personal computing company, it added portal music in 2001, and now the living room in 2006."

While many of Apple's announcements on Tuesday had been anticipated by the Street, according to Munster, he believes the impact of the new products will act as catalyst to help drive the company's shares over the next three to four quarters.

Similarly, the analyst believes updates to the iPod nano and iPod shuffle will be sufficient enough to reverse the two-quarter decline Apple has seen with iPod sales.

Munster maintains an "Outperform" rating on Apple shares with a price target of $99.
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