Apple Inc. (AAPL) What to Expect From Apple Watch 2

This fall, Apple Inc. (NASDAQ:AAPL) isn’t just going to unveil new iPhones. The company is also expected to take the wraps off its second-generation smartwatch, the Apple Watch 2.

We won’t know everything for sure until then, but for now, here’s what we know and what to expect from the newest Apple Watch.

Apple Watch 2 rumors
Source: Brad Moon

Building on Apple Watch Success

Apple announced its first smartwatch in late 2014, then began shipping the Apple Watch in April 2015.

Apple immediately dominated worldwide smartwatch sales, despite a multiyear head start by companies like Samsung (OTCMKTS:SSNLF), Pebble and Lenovo’s (OTCMKTS:LNVGY) Motorola Mobility.

However, being the top smartwatch didn’t necessarily translate into the iPhone level of revenue some had been hoping for. Estimates are AAPL sold 12 million Apple Watches in its first year. Sure, $6 billion isn’t nothing — the WSJ pointed out it was three times annual revenue for Fitbit Inc (NYSE:FIT). But for comparison’s sake, iPhones generated $31 billion in Q3 2015 alone.

With the Apple Watch 2, Apple clearly hopes to boost those numbers.

The primary strategy will be releasing a second-generation product that addresses the key complaints about version one.

What to Expect From Apple Watch 2

The original Apple Watch wasn’t perfect, but its success in capturing over 60% of the market in 2015 suggests AAPL got many of the design fundamentals right the first time. So don’t expect any shocking changes with the Apple Watch 2. It’s not going to do an about-face from square to circular, for example — despite that trend with competing smartwatches.

Skipping radical changes avoids the appearance that Apple is flailing and makes it easier on app developers, who don’t have to make significant UI changes between first and second generation devices. It also keeps accessory compatibility, avoiding angering early adopters who invested in expensive add-on Apple Watch bands like the $690 Hermès Cuff.

Instead, expect Apple to fine-tune that original design.

Among the expected changes with the Apple Watch 2 are:

  • Faster CPU for improved performance
  • Higher capacity battery for longer life
  • Built-in GPS and barometer
  • Improved water resistance

The changes are all focused on addressing criticisms of the original Apple Watch. Particularly that it is too slow when using apps and suffers short battery life. Health and fitness tracking also remains a key objective.

The original Apple Watch was good — with excellent apps and hardware like a heart rate sensor. But it needed an iPhone nearby to track distances accurately by GPS. The addition of a GPS, barometer and improving water resistance will help AAPL to position the Apple Watch 2 as a full-featured and standalone alternative to fitness trackers from Fitbit.

For months, rumors had the Apple Watch 2 being equipped with an LTE radio. This would let it break the iPhone tether altogether. It appears that concerns over the battery drain of a cellular chip have quashed those plans. At least for this year …

When Will Apple Watch 2 Arrive?

That is the big question. Not if, but when. AAPL took its time in introducing the original, but that device has been on sale for over a year. Hopes it would announce the follow-up at its March event didn’t pan out. Instead, new Apple Watch bands were released and prices were cut by $50.

The smart money is betting on a fall release for the Apple Watch 2, possibly at the September iPhone event. That timing would make sense since it would give Apple ammunition to take on popular new rivals like the Fitbit Blaze during the all-important holiday shopping season.

The Apple Watch 2 also could take advantage of smartphone shoppers checking out the iPhone 7. With iPhone upgraders in Apple Stores, AAPL could demonstrate the new smartwatch in hopes of making a double sale.

Finally, the new watchOS operating system arrives in September, promising a huge improvement in usability and boosted performance. Having the highly anticipated watchOS release arrive on new hardware — for a one-two punch — would be ideal.

Aside from the strategic reasons for a fall release, there is a key indicator that Apple is getting ready for a launch. As reported by 9to5Mac, Apple Watch prices are dropping at national retailers and are now effectively starting at $199. That’s $100 below the new discounted price AAPL introduced in March. And it’s a pretty reliable sign that retailers are trying to clear out existing stock to make room for new gear … like the Apple Watch 2.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

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