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http://www.forbes.com/markets/2004/11/29/1129automarketscan07.html?partner=yahoo&referrer=
Apple Seen Building Entertainment Servers
11.29.04, 10:58 AM ET
Merrill Lynch said game consoles will likely eventually edge out PCs as the dominant home computing system. "The future of microprocessors, storage devices, and development environments could be driven by the booming videogame industry," Merrill Lynch said. The research firm added that it's premature to know which device will become the centerpiece of the digital family room of the future, saying it doubts that 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 entertainment device or (2) a new system we dub the entertainment server will be created," Merrill Lynch said. "We see a window of opportunity for Microsoft (nasdaq: MSFT - news - people ) if it can introduce Xbox 2 mid-next year and have the holiday season to itself before Sony's PS3 hits the market." The research firm said Apple Computer (nasdaq: AAPL - news - people ) seems a likely candidate to build an entertainment server based on its iPod, iTunes, iPhoto, iDVD and AirPort Express products. "If the PC loses out to the game console or entertainment server, there will be winners and losers," Merrill Lynch said. It listed IBM (nyse: IBM - news - people ), Sony (nyse: SNE - news - people ) and Apple as potential winners, while Intel (nasdaq: INTC - news - people ), Hewlett-Packard (nyse: HPQ - news - people ) and Dell (nasdaq: DELL - news - people ) would be possible losers. "Even if successful with Xbox, Microsoft may have more to lose given its PC dominance," Merrill Lynch said.