If you are trying to restore your Apple TV using iTunes 11 you may get the message “The Device Cannot Be Found.”
Apple has acknowledged this issue and suggests the following resolution;
Step 1. Download the Apple TV software restore file to your Desktop or other location by right-clicking on the link for your model below and then selecting Download Linked File As or Save Link As.
Note: If the file downloaded as a .zip file, you will need to change the file extension to .ipsw instead.
Step 2. Select your Apple TV in iTunes 11.
Step 4. Locate and select the .ipsw file on your Desktop or where you saved it, then click Open.
Step 5. After the Apple TV has been restored, disconnect the Apple TV from iTunes and reconnect it to your television.