While Tim Cook has dropped hints that Apple is hard at work on a television to drive the next era of growth, the company’s wristwatch-style device, still in development, may prove more profitable.
The global watch industry will generate more than $60 billion in sales in 2013, said Citigroup analyst Oliver Chen. While that’s smaller than the pool of revenue that comes from TVs, gross margins on watches are 60%, he said.
That’s four times bigger than for televisions, according to Anand Srinivasan, a Bloomberg Industries analyst. Apple, with its iconic brand and lucrative retail network, is poised to tap into the growing watch industry. Headway in the business would help compensate for slowing growth in other areas, such as iPhones and iPods.
Apple’s stock has slumped by more than a third since peaking in September on signs of accelerating competition led by Samsung Electronics and concern over how quickly chief executive officer Cook is pushing into new products.
“This can be a $6-billion opportunity for Apple, with plenty of opportunity for upside if they create something totally new like they did with the iPod — something consumers didn’t even know they needed,” said Chen, who covers luxury-goods retailers.
The TV industry will generate $119 billion in sales this year, according to IHS Electronics & Media. Using Chen’s margin estimates, a 10% share for Apple in each market would mean gross profit of $3.6 billion for watches, outstripping $1.79 billion for TVs.
Apple has a team of 100 product designers working on a wristwatch-like device that may perform some of the tasks now handled by the iPhone and iPad, people familiar with the company’s plans said last month. Features under consideration include letting users make calls, see the identity of incoming callers and check map coordinates, said one of the people, who asked not to be identified because the plans aren’t public.
It would also house a pedometer for counting steps and sensors for monitoring health-related data, such as heart rates, this person said. Apple seeks to introduce the device as soon as this year, this person said. Apple has filed 79 patent applications that include the word “wrist,” including one for a device with a flexible screen, powered by kinetic energy.
To accommodate the smaller screen of a watch, Apple could adapt its iOS mobile software to limit what information is sent to a wrist device, said Scott Wilson, a designer who developed a line of watchbands for people who wanted to use an iPod nano as a watch. “There’s no doubt the wrist is a valuable piece of convenient, glanceable real estate for viewing essential information,” Wilson said. “It’d be great to see information like, ‘Where are we meeting for lunch?’” Past attempts to create smart watches haven’t gone far.
Microsoft signed up partners including Citizen Watch and Fossil in 2003 to build products that deliver traffic, sports scores and weather reports. The effort fizzled by 2008. The timing looks better now. Having grown accustomed to using mobile apps in their everyday lives, consumers are more apt to try devices that make accessing data more convenient.
The start-up Pebble Technology plans to sell watches that work with Apple and Google software after raising more than $10 million on the crowd-sourcing site Kickstarter. Martian Watches and Meta Watch are trying similar approaches.
Apple’s watch foray would also open a new front in its competition with Google — this time, in the area of wearable technology. Google is developing Google Glass, a computing device that resembles spectacles and is worn on the face.
Owners of the glasses will be able to speak commands to snap photos, record videos or ask for directions, among other tasks. Apple has proved its ability to move into mature markets and remake them with new, easy-touse innovations. Before Apple created the iPhone, cell phone makers were enjoying record sales of devices based less on technological innovation than on fashion or brand.