Apple is a habitual party crasher, but can the company's history
of arriving late and making a big splash in various gadget categories
continue with the Apple Watch?
The technology company was a
late entrant into many of its most prominent product categories: The
iPod wasn't the first digital music player and the iPad wasn't the first
tablet. But in most cases, the innovation the company infused into its
devices ignited previously dormant markets — and Apple products became
"must haves."
Smartwatches have been around for a few years, but makers such as Samsung and Sony have failed to make them a runaway hit.
Apple's stated entry into the smartwatch arena this week with a gadget
that won't go on sale until early 2015 raises questions: Can the company
work its magic as it has in the past and convince people that they
really need a smartwatch -or will this time be different?
Experts say Apple is likely to stimulate interest in smartwatches, but
they contend that the company must overcome a few hitches before its
device can succeed.
Wearable devices is a small but growing
area that technology companies are hoping to capitalize on as the
smartphone and tablet usage grows. Citi Investment Research estimates
the market for smartwatches will be $1.4 billion to $1.8 billion this
year and could grow to $10 billion by 2018.
But no company has
cracked the formula for a mass-market success. The entire "wearables"
category includes sport fitness bands, watches and other apparel
-everything from Fitbit's $99 Flex fitness tracker and Nike's $99
Fuelband fitness monitors to Samsung's $199 Galaxy Gear smart watch.
Experts say the Apple Watch's real test will come when developers begin
to develop apps for the gadget, which is Apple's first brand-new product
introduction in four years.
"What separates Apple from the
others is partially the design itself -it's a lot more elegant than
other offerings- as well as the Apple ecosystem and (software) developer
opportunity," said Susquehanna Research analyst Chris Caso.
Forrester analyst James McQuivey said some Apple Watch features, like
the controller knob on the side and the emphasis on different watch
sizes and style options for watch bands and clasps, could help the watch
stand out.
"Apple has unique strengths to make something
elegant and attractive," McQuivey said. He compared the Apple Watch to
Apple's earlier innovations like the iPod and its trademark white
earbuds.
"They made it something you wanted to be seen
carrying," he said. "You have (an iPod) just to make people see that you
have it. Even people who didn't buy it knew what it was."
McQuivey predicts a successful launch but not quite as big a launch as
Apple's iPad. He believes the company will ship 10 million units by the
end of 2016.
"You only need 10 million to hit that tipping point, then millions of more people will want one suddenly," he said.
By comparison, research firm IDC forecasts that about 4 million
smartwatches will be sold this year, more than double the 1.7 million
sold in 2013. The top brands are Samsung and Pebble.
Canaccord
Genuity analyst Michael Walkley gives an even rosier outlook,
forecasting 14 million will sell during fiscal 2015 and 25 million in
fiscal 2016.
"We believe our estimates could prove
conservative, as we were impressed with the design, user interface, and
features included in Apple watches," he said in a client note. "We
believe the fitness and health features are the most compelling in terms
of driving sales of the new product category for Apple and could also
drive stronger demand than our initial estimates."
Even so,
there are a few sticking points that could keep the device from being a
success. The first is its price tag, which starts at $349. Several
analysts said that's more than they were expecting.
"There may
be consumer concern about the price," said eMarketer senior analyst
Cathy Boyle. "It's going to catch a lot of people's attention, but
adoption is going to be gradual."
A slow build won't necessarily doom the product. iPhone sales started
slow in the device's first year on the market. Apple sold just 5.4
million iPhones between mid-2007 and the summer of 2008. More than 550
million have been sold as of June. With the iPad, Apple sold 19.5
million tablets in the first year on the market. More than 225 million
iPads have been sold.
The Apple Watch faces a few other
problems: lt's unclear how long the battery lasts and the watch won't
ship until early 2015, disappointing those who were hoping to get or
give one as a holiday gift. It also has to be tethered to an iPhone via
Bluetooth for some functions, including GPS.
"The lack of GPS
or Wi-Fi natively on the device will require an iPhone to be nearby for
most tasks, which both limits some near-term use cases," said Raymond
James analyst Tavis McCourt. "But it provides ample fodder for upgrade
opportunities in the future."
The long lead time before the
product ships could mean the device will be more functional once it's
released, since app developers have more time to create apps
specifically for the watch. And Apple is loading the device with fitness
apps and an Apple Pay digital wallet service that might appeal to some
consumers who are on the fence.
"The intention (of showing the
watch months before it ships) is to show the developer community they
have an elegant industrial design, but to make it really useable and
exciting you have to have apps for it," sai
