Apple is developing a television set that will transform home entertainment by playing films or TV shows straight from the internet, according to a report that has created a buzz among the Californian company's online fans.

A technology pundit with a US finance house said that the inventive firm would launch a stylish premium television with a Digital Video Recorder (DVR), allowing people to record and download content without a DVD player or set-top box.

"We expect Apple to design a connected television over the next two years (launching by 2011) with DVR functionality built in," predicted Gene Munster, of American investment firm Piper Jaffray.

Moving into TV production would be a logical next step for Apple chief executive Steve Jobs, who has diversified the company away from its origins as a manufacturer of home computers in recent years.

Under his guidance, the once faltering company has become a powerful force in home entertainment through its gadgets and iTunes online shop, now the world’s biggest seller of music online. Apple recently signed a five-year $500m deal for the production of computer monitors with the Korean electronic giants LG, which also makes televisions.

Mike Butcher, editor of UK TechCrunch website, said that an Apple TV set made perfect sense. "I think it’s very likely," he said.

"It would have the iTunes site built into it so you could run or download movies and play your music or video collection."

Apple already makes the £199 Apple TV, a box which transmits music, films and shows onto TV screens but a new television would stand out from the competition because it would not require any extra devices or attachments.

"With the use of a CableCARD for digital HD TV signal, Apple could effectively replace the home entertainment system (including a music stereo, cable box, Blu-ray/DVD player, and gaming console) with an all-in-one Apple television," enthused Mr Munster.

He acknowledged television production was fiercely intensive but suggested Apple knew how to sell premium models in crowded markets, saying: "The argument that Apple will not enter the television market because prices have declined by 70 per cent in the past three years is a similar argument used to conclude Apple would not enter the cell phone market, given phones had seen similar price declines."

Asked about the story yesterday, an Apple spokeswoman said: "We would never comment on rumour and speculation."

Jobs usually announces new products at the Macworld conference in San Francisco in January, though he could not make the event last month due to a "hormone imbalance" which has caused weight loss.

Unofficial Apple websites were abuzz with comments welcoming or dismissing the TV speculation. "Apple won't be making any sort of television this year or for the next 1,000,000 years," wrote one commentator.

Another countered: "If Apple had not just signed a 5 year contract with LG, I would not believe this story? Now with LG on board they gain instant access to the hardware."

Tom Dunmore, editor in chief of Stuff magazine, described Apple’s entry into TV production as possible but unlikely. He said: "Possible in that they have got the technology to do it; they produce large screen computers and monitors. However the Apple TV has not been a massive success and it’s still referred to as a hobby by the management which suggests to me that they wouldn’t be able to produce it in way that would be commercially viable."

"But Apple do like to surprise us," he added.

Source: London Independent