Whether or not Apple (AAPL) has found success with the Apple Watch is largely a matter of perspective.
Critics would argue that the company has “only” sold 7 million units of the device so far, despite it being ballyhooed for months leading up to its debut in the middle of this year.
Fans of the company (and presumably owners of AAPL stock), would argue that Apple has “already” sold 7 million watches in just a few months, which is an impressive feat considering smartwatches had been a very niche product until Apple unveiled plans to enter the arena.
The truth, as usual, is probably somewhere between the two extremes. The scales are tipping toward success with the Apple Watch, though, in that AAPL was never truly expecting the device to be a game-changer yet.
In fact, massive revenue was never even close to being the point of the device.
The Apple Watch Experiment Is Over
A total of 7 million smartwatches is a big number, but pales in comparison to the 13 million iPhone 6s devices the company sold in just three days after it launched in late September. In fact, even the struggling iPad sold better last quarter, with the company racking up sales of 10.9 million for the decreasingly popular tablet.
From that perspective, it’s tough to call the Apple Watch a success. But then, sales numbers were never the point for the inaugural version of the device.
As yours truly said back on April 13:
“Calling a spade a spade, yes, the Apple Watch is still silly at best, and pointless for most consumers.
“It doesn’t matter though…Consumers are into silly and pointless, especially when it may just end up being useful in ways we’ve yet to realize.
“And that may be the biggest reason of all to get excited about the Apple Watch — the chance that it could just become the new norm. It costs Apple practically nothing to take that shot, so why not take it?”
The premise and opinion still stands, though an addition (or maybe just a clarification) is merited: The first release of Apple Watch wasn’t meant to be major revenue source. More than anything else, it was an experiment in wearables to answer questions regarding demand, usage, pricing, and fitting a lot of technology into a relatively small space.
Apple likely got all the answers it needed, with most of them suggesting yes, this is a viable product. From here, the refinement can begin in earnest.
What’s Next for AAPL and Its Smartwatch?
If there’s no smartwatch market to speak of, somebody might want to tell the likes of Samsung and Fossil.
And someone might want to also tell them that Apple is still the name to gun for in the smartwatch sector, as the Apple Watch outsold all other smartwatches combined for the past five quarters … and the Apple Watch was only on the market for two of those five quarters.
Translation: Whatever market there is for the device, Apple’s dominating it.
To that end, most expert opinion-providers say there’s a lot more growth in store as consumers and companies figure out the value of so-called wearables. And the projected numbers aren’t small. Telecom and media research house Ovum, for example, expects the wearables market to be worth $27 billion by 2020.
Assuming an average selling price of $500, the 7 million watches sold by Apple so far this year translates into revenue of $3.5 billion … well short of $27 billion Ovum was talking about. As we noted, however, the Apple Watch on the market right now is just a seed, or an experiment. The next version will be better and more functional. The next use of the technology may not be in a watch format at all. It’s a process.
Underscoring that idea is a comment recently made by Apple product designer Marc Newson:
“Look at the iPhone: it was a game-changing thing, and I believe that this product — for many, many reasons people are not aware of because they haven’t thought ahead or they just don’t know — will become a similarly game-changing thing. In five years’ time I have absolutely no doubt this will be right up there.”
While the Apple Watch will never be as earth-shattering as the iPhone, the Apple insider likely has his finger on the product’s pulse as well as anybody. The Apple Watch itself isn’t sufficient reason to own AAPL shares, but it’s certainly doesn’t hurt the bullish case.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
