Apple Inc. (NASDAQ:AAPL)’s reportedly contracted with the Pixelworks, Inc. (NASDAQ:PXLW), which worked in favor of latter’s stock, rising as much as 17% after the news. According to a report of 3D Analytics at Seeking Alpha, the iPhone maker entered into a deal with the graphics chipmaker to develop the Apple TV, which is due to launch in the coming months.

Apple TV

Apple, a catalyst for Pixelwork stock

Apple is shown as one of the largest customers of Pixelworks in its recent filing, contributing 14% of company’s revenue in the previous quarter. Apart from the claims of 3D Analytics, a statement from Pixelwork CEO Bruce Walicek’s that the company is working on a large project to develop a high-tech display, a conclusion can be safely drawn that the product is Apple TV. According to a report from 3D Analytics, Apple iPhone 6 and iPad can, also, sport latest Iris graphics chips, a product of Pixelwork.

There are chances that Apple enters into a long-term strategic relationship with Pixelworks paving way for more contracts to the latter, in the future. Pixelworks revenues have risen significantly year-on-year, and for the latest quarter, revenues have grown 64% from the same quarter last year.

Presently, short interest in Pixelworks was high, and the latest report may have forced short sellers to cover their positions. Around 9.73 million shares of the company were traded yesterday compared to an average of 732,000 in the last 30 days.

The report, further, claims that Pixelworks shares are highly undervalued considering potential of contracts from Apple. On Wednesday, Pixelworks closed at $8.73 up 14.8%.

Roku ahead of Apple TV

Separately, the reports emerged that Apple TV lags behind Roku in terms of set-top boxes purchases. Last year, Roku took the set-top boxes market by the storm garnering half of the total boxes sold in the United States. Apple holds the second spot, but the gap between the company and Roku sales numbers are widening.

Last year, rise in the streaming media devices was witnessed with companies like Amazon and Google offering their own devices. According to Park Associates report, around 44% of the US broadband households with a streaming player prefer Roku, as against 26% for Apple TV, a huge difference of 18%. The gap widened from last year’s 13%. In 2013, Roku garnered 46% in the US set-top purchases that was 20 points ahead of Apple TV.