It some times feels like Apple TV is the forgotten child of the company: First announced on Sept. 12, 2006, the media streaming device has only had one upgrade since its initial release, and Apple CEO Steve Jobs has referred to it several times as a “hobby”.  It is never a product that has reached much attention, but all of that may be changing thanks to the new Google TV.

Google and Apple are very much locked in a war with one another now, and neither side seems to be able to do anything without the other one offering some sort of response in return.  The fact that Google has been working on the Google TV streamer for some time now, and officially announced it on May 20th, made people wonder if Apple might go back and revisit its own TV device.  If rumors are true, that is exactly what Mr. Jobs and his company are doing.

applevsgoogleAccording to sources that spoke with Engadget, a major overhaul of the Apple TV is currently being prepared, although no release date has been announced as of yet.  Apparently the new iteration of the device will see it slimmed down to about the size of an iPhone and will only have two ports on it: one for power and the other for television out with 1080P HD resolution.  Some of the other things you can expect is to see the physical memory reduced from a 160 GB hard drive down to just 16 GB of flash memory as Apple would be switching your media storage over to the cloud, which you would then in turn stream media as opposed to storing it locally.  If you did want to have you media locally located with you, you would need to keep it on an external hard drive like Apple’s Time Capsule.  There is also a rumor that the new version would be running off of Apple’s A4 chip, that same one which is to power the fourth generation iPhone.

The biggest changes would see the third generation Apple TV moving away from its customized Mac OS X operating system to the iPhone OS.  There is no word on if the device would be able to run applications from the App Store as of yet, but it almost feels ridiculous to think it won’t.  The App Store is a huge money maker for Apple, and being able to have yet another outlet for those apps only makes financial sense.

I’ve been personally saying for some time now that I could see Apple changing over to the iPhone OS for the Apple TV as it is the only thing that makes sense.  And how much you want to bet that the iPhone, iPod Touch and iPad will have some sort of spiffy apps that turn them into keyboards/controls for it?  Web surfing anyone?  Your handheld devices would become like keyboards for the Apple TV and your television the monitor.  This is just my speculation at this point, but it does make some sense.

The biggest surprise was that multiple sources told Engadget the retail price would be $99.  This is pretty low for an Apple product, but the more people that have one, the more apps, videos and music the company can sell.

No release date is known at this time, but I wouldn’t be too surprised to hear an announcement made at the upcoming World Wide Developers Conference Apple is holding starting on June 7th.