Considering that Apple itself had dismissed its Apple TV as a hobby, we weren’t really expecting too much from it. Then a funny thing happened: Google detailed its vision of Web TV, and Apple is suddenly interested in upgrading its own product. While rumors indicate that Apple has been quietly working on an upgraded Apple TV long before Google TV came about, the timing is suspect.

Engadget reports that a tip confirmed with a close-to-Apple source indicates that Apple is working to transform Apple TV from hobby to serious consumer product. It will get the same architecture as the upcoming iPhone 4 and will feature a focus on small, slim set-top design. Specs will include an A4 processor, 16 GB of flash storage and full 1080p HD support. As far as content, the focus will move to cloud-stored streamed content vs. device storage. Given its iPhone roots, it’s likely that it’ll support apps.

Perhaps even more interesting than the hardware redesign is the price overhaul; the new product is rumored at a $99 price point. To buy Apple’s hobby-box today would cost you $229.  Apple isn’t planning on unveiling the device during WWDC, though an unveil there would provide an ego-boost after the iPhone 4 debacle.

I’m still more intrigued by Google TV, but let’s hope that the $99 price tag helps to drive Google’s price down.