Apple Inc. (NASDAQ:AAPL) was forced to slow the rollout of its highly anticipated Apple Watch due to a faulty part, according to a story published Wednesday by the Wall Street Journal.
I’m not exactly shocked. But as an investor in AAPL stock myself, I am disappointed. The bungled launch only reaffirms what I’ve suspected for about six months now: Tim Cook simply cannot innovate or execute like Steve Jobs.
Maybe no one can. I buy that. But the supplier issues that AAPL is facing with the Apple Watch are, either way, inexcusable and a worrisome reminder that no single company remains the top dog in the consumer tech sector very long.
What the Heck Happened?
Thankfully for AAPL, the early problems with the Apple Watch shouldn’t result in a recall, as the problems were caught in the testing stages. The faulty part was the so-called “taptic engine,” a component responsible for generating a tapping sensation on the user’s wrist as a less-intrusive way of relaying notifications.
As a result of this supply chain failure, AAPL let go of the offending supplier, taking the suppliers of the Apple Watch taptic engine from two to one. Naturally, the release of the Apple Watch will be slowed as a result.
Steve Jobs is rolling in his grave.
Although in the grand scheme of things Apple Watch sales will be a pretty miniscule portion of overall AAPL revenues, this is an awful beginning to Apple’s first foray into wearables. More importantly, it helps to level the playing field with other smartwatch competitors, most notably Google Inc (NASDAQ:GOOG, NASDAQ:GOOGL).
Apple’s bungled, high-profile launch could be more costly in the long term, as the wearables category grows to what could become an $80 billion market by 2020. Given that I already believe the Google Watch will slaughter Apple Watch in the long run, the blunder by AAPL won’t help its brand.
And it certainly doesn’t do anything to prove that Tim Cook is capable of overseeing a smooth product launch in a new category — something Steve Jobs sort of excelled at.
Even Apple Pay (which, let’s remember, is not a new product but a new service) was plagued in its first few months by fraudulent transactions at nearly 60 times the levels seen on plastic swipe transactions. While the onus of blame for those extremely high levels of fraud lies moreso on the banks than AAPL, it’s beginning to look like managing partner relationships will be a chronic problem for Tim Cook.
Early reviews of Apple Watch were already unflattering at best, and with Google teaming up with Intel Corporation (NASDAQ:INTC) and luxury brands like Tag Heuer (likely more partnerships like that to come) on high-end Google smartwatches, AAPL probably shouldn’t count on meaningful revenue from the Apple Watch for … well … ever.
As of this writing John Divine was long shares of AAPL stock, GOOG stock, and GOOGL stock. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
