Is The Apple Watch A Bust?

[StillAWarrior]

I always ask with these types of products, is it cool or is it good....right now Apple Watch is still just cool to me.

That's an interesting way to look at these products.  Right now, I'd answer neither.  And that's a pretty high price point for neither.


And I want to clarify an earlier post.  When I said that it reminded me of the negative reviews for the iPad, I wasn't suggesting that it will be the home run that the iPad turned into.  Unless they have some significant improvements in functionality (starting with eliminating the need to pair it with a phone that you also have to buy), I think it will be a niche product.

[Tugg Speedman]

Apple's Lack of Sales Data Raises Flags About Demand for Watch
July 15, 2015

http://www.bloomberg.com/news/articles/2015-07-15/apple-s-lack-of-watch-data-fuels-intrigue-about-gadget-s-demand


Apple Inc.'s silence on demand for its smartwatch is making it harder for analysts to gauge whether the wearable gadget is performing successfully. Yet even bearish estimates suggest the timepiece could become a bestseller.

Estimates for unit sales for the quarter that ended in June range from as little as 3 million to as many as 5 million. Bears say shipments dropped after the first few weeks, while others say Apple Watch is in the early stages of gaining widespread consumer acceptance.

Third-quarter results due next week won't shed a lot of light on the actual numbers. The company has said it won't break out unit sales for Watch, and Chief Executive Officer Tim Cook in April said only that he was happy with the response and that demand was outstripping supply. Even so, if analyst guesses are near the mark, the watch is doing at least as well as the iPhone and iPad -- both the first products of their kind for the company -- following their debuts in 2007 and 2010.

"The lack of having any numbers creates this intrigue," Ben Bajarin, an analyst at Creative Strategies, said in an interview. "It's a new category -- anytime Apple gets into a new category everybody is obviously super interested in that. You want to know how the new category is doing. Investors want to see growth."

'Other' Revenue

Cupertino, California-based Apple in October said it would limit how much information it released about Watch sales, lumping it into a new revenue category called "other" along with iPod, Apple TV, Beats headphones and speakers.

"I'm not very anxious in reporting a lot of numbers on Apple Watch and giving a lot of details on it because our competitors are looking for it," Cook said in October.

Though even the most optimistic estimates for Watch sales would add up to a fraction of the company's total revenue for the quarter, the gadget's perceived success is a proxy for whether Cook can continue to innovate and grow by pushing Apple into new products. The company is aiming to become an even more central part of consumers' digital lives, including wearable computing, fitness and health, and media content like music and news.

The thirst for sales numbers is partially Apple's own doing, after years of training investors, journalists and the public to expect announcements from the company saying that its latest iPhone or iPad had reached a record opening weekend in sales. Such announcements have become part of the buzz around product introductions that Apple has used to generate publicity and stoke consumer demand.

Web Orders

The company's approach to this new gadget, its first in five years, was different. Apple didn't offer the watch for sale in its stores at introduction. Instead, new retail chief Angela Ahrendts urged her employees to direct customers to the company's website to custom-order a Watch after trying out its features and styles in a store. Trying on the Apple Watch, in many cases, required an appointment.

In the absence of data from Apple about smartwatch demand, some research firms' estimates have taken on new power. Slice Intelligence, a market research company based in Palo Alto, California, released data to Marketwatch.com on July 8 estimating Watch sales had fallen 90 percent since its opening week. The estimates were based on electronic receipts and cover online sales in the U.S., Slice said.

There were two very different interpretations of Slice's information: Some took it as a sign that Apple had finally stumbled, while others questioned the breadth and quality of the data.

Past Introductions

"To see U.S.-only online purchases drop after a period of pent-up demand and as store inventory become available is not interesting and says almost nothing about the product's performance," Horace Dediu, an analyst with Asymco, wrote on Twitter in response to a journalist's query.

In a statement, Slice said it's confident in its Apple Watch estimates, and the recent decline may reflect a shift in sales from online to in-store purchases.

Looked at another way, Slice data suggests the Watch is at least on track to do about as well in its first three months as the iPad did at its release, and may blow away the original iPhone's debut numbers. Apple sold 2.97 million Watches in the U.S. online during the quarter that ended in June, according to Slice estimates.

After its release in late June 2007, Apple shipped 270,000 units of the iPhone in its first quarter, followed by 1.12 million more in the next quarter, for a total of 1.39 million in roughly its first three months. The iPad tablet hit stores in April 2010 with sales totaling 3.27 million in its first quarter on the market.

Analysts' Estimates

Creative Strategies' Bajarin said he estimates Watch sales were 4.7 million in the recent quarter and will reach about 5 million in the current quarter, before accelerating during the holiday season. FBR Capital Markets' Dan Ives estimates the company sold 5 million in the June period, with revenue from the smartwatch increasing to as much as 8 percent of the company's total in fiscal 2017.

Whatever comments Apple executives make about Watch sales next week, observers will be poring over revenue growth in the "other" category for any clues
UBS research "has indicated the Apple Watch is off to an OK but not fantastic start," with online "search volumes reflecting less interest than in previous Apple and consumer electronic product introductions," Steven Milunovich, an analyst, wrote in a June 25 note to investors. UBS is estimating Apple sold 3 million watches during the third quarter and may sell 8 million in the current period.

Whatever comments Apple executives make about Watch sales next week, observers will be poring over revenue growth in the "other" category for any clues.

"You're going to watch 'other' blossom from last quarter to this quarter," Bajarin said. "Then the real benchmark shifts -- every quarter from here on out until they give us Watch numbers, what happens with 'other'? Does it grow? Does it shrink?"

As for Cook, he told analysts in April not to read anything more into what he was saying about Watch demand.

"I'm thrilled with it," he said. "I'm not sure how to say that any clearer than that."

[Litehouse]

Heisenberg, are you short AAPL or something?

[Litehouse]

I would never get an apple watch, but I love my fitbit surge.

I'm curious why you feel that way, is it just cost?

[77ncaachamps]

When it becomes an essential wearable technology (read: detects physiological changes and warns the wearer), then it'll sell more.

I don't need a watch.

I have an iPhone to tell me the time.

[brandx]

I think it will eventually be almost as much of a necessity as a cell phone is now, especially in the business world.

But, I will never own one.

[Tugg Speedman]

Heisenberg, are you short AAPL or something?

No, but thinking about it.

Apple is a $700 billion company.  Their problem is size.  They need mega ideas.  Selling a few watches and a few techno-geeks on apple pay is not going to move the needle.  Streaming music for $10/month is also not going to do it.  They need ideas that generate tens of billions in sales.  Selling 30,000 watches a week is a rounding error for them.

With Jobs gone the watch was the first major new product idea under Cook, and the first one in 5 years (iPad).

The reason I'm thinking (again, only thinking) shorting Apple is they might (repeat might) be on the road to being a replacement cycle company.  They sell iPhones when someone who has one breaks in addition to general population growth .

In other words, they are just like an auto company.  Everyone that needs a car has one.  So they sell cars when you need to replace your car in addition to general population growth.

[mu03eng]

I'm curious why you feel that way, is it just cost?

Cost is part of it, but really it's about functionality I don't really need.  One, I'm old school and I wear my Citizen Skyhawk nearly every day.  Two, I look at the right functionality in the right device...it's no problem to view pictures, email, etc via my phone, don't need to do it on a "watch".  All I need in a smart wearable to do is let me know if I have a call/email/text so I know if it's worth dragging my phone out.  I also want a wearable to track my fitness/heart rate.  Lastly, controlling music is something I want but I definitely don't need to manage playlists through the watch etc just forward/backward/play/pause and volume.

Other than those functions I haven't seen anything an Apple watch does that either A)makes my life easier or B)does a job I'm doing some other way but does it so well that the price makes sense.

[Chicos' Buzz Scandal Countdown]

When it becomes an essential wearable technology (read: detects physiological changes and warns the wearer), then it'll sell more.

I don't need a watch.

I have an iPhone to tell me the time.

I've heard this before... that the watch detecting physiological changes would be valuable.

Genuinely curious: In a perfect scenario, what would the watch detect, and then what would the wearer do with that information?

So far I've heard of a future gen detecting blood oxygen levels. That's cool, but if I say to you, "Your blood oxygen is at 95% right now," what do you do with that information?

[mu03eng]

I've heard this before... that the watch detecting physiological changes would be valuable.

Genuinely curious: In a perfect scenario, what would the watch detect, and then what would the wearer do with that information?

So far I've heard of a future gen detecting blood oxygen levels. That's cool, but if I say to you, "Your blood oxygen is at 95% right now," what do you do with that information?

It's about baseline comparison.  There is also technology out that, in theory, that would also allow us to test our blood weekly or even daily.  You combine that data with your wearable data and you can create a health profile that tells you when things are abnormal before you even feel abnormal.  It also rules out outliers, as an example for some reason people of Mediterranean descent seem to be genetically predisposed to have a higher cholesterol level but actually a lower incident of heart disease.  So knowing what a running "normal" is for you allows me to know if you are outside of normal and act on it.

https://en.wikipedia.org/wiki/Theranos

[Chicos' Buzz Scandal Countdown]

It's about baseline comparison.  There is also technology out that, in theory, that would also allow us to test our blood weekly or even daily.  You combine that data with your wearable data and you can create a health profile that tells you when things are abnormal before you even feel abnormal.  It also rules out outliers, as an example for some reason people of Mediterranean descent seem to be genetically predisposed to have a higher cholesterol level but actually a lower incident of heart disease.  So knowing what a running "normal" is for you allows me to know if you are outside of normal and act on it.

https://en.wikipedia.org/wiki/Theranos

I think if that was out today, I'd ask my insurance company to buy it, not me.

[mu03eng]

I think if that was out today, I'd ask my insurance company to buy it, not me.

Insurance companies are offering incentives for wearables right now.  My wife gets points she can "spend" in the online insurance store based on the number of steps she records with her fitbit.  She also gets reduced rates on her premiums assuming she hits a yearly step goal and participates in at least 2 health activities.

Soon health insurance will offer things similar to Snapshot from Progressive.  If you let them monitor you they will give you cheaper insurance because they know you aren't doing "bad things"

[4everwarriors]

Smaller co-pay on your heart catheterization, ai na?

[Chicos' Buzz Scandal Countdown]

Insurance companies are offering incentives for wearables right now.  My wife gets points she can "spend" in the online insurance store based on the number of steps she records with her fitbit.  She also gets reduced rates on her premiums assuming she hits a yearly step goal and participates in at least 2 health activities.

Soon health insurance will offer things similar to Snapshot from Progressive.  If you let them monitor you they will give you cheaper insurance because they know you aren't doing "bad things"

I'd agree that's likely; I'm just wondering where a premium device fits in there. Seems the health functions are secondary or even tertiary priorities to AAPL

[mu03eng]

I'd agree that's likely; I'm just wondering where a premium device fits in there. Seems the health functions are secondary or even tertiary priorities to AAPL

Completely agree, which is why I think the Apple Watch, while not a full bust will not be a market definer like the iPad and iPod were.

[Juan Anderson's Mixtape]

So far I've heard of a future gen detecting blood oxygen levels. That's cool, but if I say to you, "Your blood oxygen is at 95% right now," what do you do with that information?

I'd do absolutely nothing.  95% is a very reasonable blood oxygen level.  How about it dials 911 if you're blood oxygen level dips below a certain point, your body temp is abnormally high or low, or you're body is showing signs of having a heart attack/stroke, etc.  Then we'd have something.

[martyconlonontherun]

I'm a runner and waiting on a good smartwatch. I think they are a year away from having music storage, bluetooth (to send to bluetooth headphones), GPS, wifi, quick messaging (with use of wifi) and an extended battery.

I think there will be a huge market for smart watches that allow people to workout or go places without their bulky phones.

[Chicos' Buzz Scandal Countdown]

I'm a runner and waiting on a good smartwatch. I think they are a year away from having music storage, bluetooth (to send to bluetooth headphones), GPS, wifi, quick messaging (with use of wifi) and an extended battery.

I think there will be a huge market for smart watches that allow people to workout or go places without their bulky phones.

Totally - if you could go sans-phone with all the functionality you described, I would be totally convinced.

You might be a little optimistic on their being a year out, as all of those things require more battery, and Apple doesn't seem to care for thickening products. Hope battery tech catches up soon.

[Tugg Speedman]

Totally - if you could go sans-phone with all the functionality you described, I would be totally convinced.

You might be a little optimistic on their being a year out, as all of those things require more battery, and Apple doesn't seem to care for thickening products. Hope battery tech catches up soon.

See Samsung Gear (android watch).  It does everything you want.  It's been on the market about a year.

But its not Apple so no cares.

[muwarrior69]

The Newton may have been a "tablet," but functionally is was way different than the iPad.  If you are saying "ahead of its time" in that the Apple Watch can become something more than a "watch with some aps," then perhaps.  But I don't know what it then becomes.

It will be mandated by executive order for all citizens (non-citizens will be exempt) to wear one. It will have the capability of tracking your location, measure all vital signs, alcahol consumption, how much weed you smoked, what purchases you make, and send it directly to home land security. BIG BROTHER LOVES YOU!