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Apple bit by Apple TV setback

Shares of Apple Inc. slipped more than 2 percent in morning trading on the Nasdaq stock market one day after the consumer electronics maker said it would delay its foray into the living room by several weeks.

"Wrapping up Apple TV is taking a few weeks longer than we projected, and we now expect to begin shipments in mid-March, not in February as originally anticipated," Apple wrote in an email to its online customers on Monday evening.

The delay almost assures that the Cupertino-based firm will be unlikely to benefit from more than a week's worth of sales of the $299 wireless media hub during its second fiscal quarter, which ends late next month.

While Apple has a long-standing history of not commenting on its product roll-out woes, earlier reports have singled out the device's embedded software as the likely source of the delay. It's also possible that the device has yet to receive the necessary go-ahead from the Federal Communications Commission, as no such approval documents have surfaced.

Like iPhone, those people familiar with the Apple TV device claim it runs a derivative of the Mac OS X operating system. Apple is expected to leverage the underlying technology in upcoming software releases such as Mac OS X 10.5 Leopard and iLife '07.

"We wouldn’t be surprised if Leopard contained a function that allows the iTunes application to be bi-passed to stream digital media to the TV," said Ingrid Ebeling, an analyst with JMP Securities.

Ebeling is among a handful of Wall Street figures who believe Apple TV, largely overshadowed as of late by all things iPhone, could be a "sleeper hit" in Apple's product offerings. She's forecasting the company to sell just over 1 million of the set-top boxes through 2008 but says that number could turn out to be "very conservative."

"We have spoken with Apple representatives on several occasions and our checks indicate that initial demand has been quite strong," the analyst told clients in a research note distributed just prior to this past weekend. She said every additional million units the company sells through 2008 will deliver approximately 6 cents of per-share earnings upside to her estimates for the year.

Thus far, Apple has said the Apple TV will utilize emerging 802.1n wireless technology to stream movies, music and photos from computers running iTunes to wide screen HDTVs located in living rooms and other leisure locations throughout the home. However, a slip of the lip by one of the company's iPod game developers recently offered hints that Apple TV will also play a significant role in Apple's bid for a piece of the casual gaming market.

Shares of Apple dropped $1.96 or 2.2 percent to $86.69 on Monday following word of the delay and admid reports of slumping stocks in China and Europe.