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  • Fear and Loathing About Apple Watch Sales

    July 23rd, 2015

    To Wall Street, a 35% increase in iPhone sales over last year wasn’t enough to keep Apple’s stock from tanking. Selling 47.5 million seems impressive, but some Wall Street analysts said it must be 50 million. Of course you have to wonder where they got those figures, and if they were based on surveys, clearly there’s a problem with the methodology. Or maybe they got them from a dark and damp place.

    Regardless, one key concern going forward is that possible financial headwinds in China might impact growth in one of Apple’s key markets. Perhaps, and certainly it appears Apple is aware of the problem. A conservative guidance for this quarter didn’t help, but that’s nothing unusual for Apple, which is almost always conservative.

    Another issue that appears to have the financial community spooked is the perception that the Apple Watch has been one huge failure. The situation only got worse because Apple continues to avoid stating actual sales. The category is buried under “Other,” along with the iPod.

    So analysts have been trying to infer sales, based on a 49% boost in that category. The key fact is that iPod sales, also classified as part of the “Other” numbers, have declined, so the rest is guesswork. But Apple has provided some clues. So, after nine weeks, the Apple Watch did better than the first iPhone and the first iPad in their first nine weeks. The former tallied sales of one million; the latter three million. But Apple was only too happy to release both fighters, so why should more than three million Apple Watch sales be kept a secret?

    Now knowing the numbers exceed three million didn’t stop some fools in the industry analyst business from still delivering estimates of 2.5 million or less. Evidently math wasn’t one of the subjects in which they excelled at college, or they assume that Apple is somehow lying about the sales.

    But not everybody assumed the Apple Watch was an egregious failure. A survey from Strategy Analytics has a more positive outlook, calming Apple sold four million units, thus garnering a 75.5% share of the market. This after less than three months of availability. In contrast, the firm estimated that Samsung sold 400,000 smartwatches of various shapes and sizes. While it’s fair to criticize market research firms, at least this one starts from a sensible perspective, that sales have to be more than three million. Remember that is based on Apple’s own statements.

    Unfortunately Apple has become its own worst enemy when considering these numbers. The excuse that this data would help competitors doesn’t wash. There are already loads of guesstimates out there from different industry analysts covering a wide range. Even if those numbers are averaged, rivals in the smartwatch business will have at least something to go on.

    Besides, Apple didn’t hold back with sales figures for the iPhone and the iPad. Remember, iPad sales continue to fall, despite Tim Cook’s insistence that he is confident about the product and hopes that the new multitasking features in iOS 9, the upgrade cycle, and the business initiative, particularly the IBM marketing deal, will result in a sales turnaround before long.

    The problem with silence, as much as it’s presumed to have some sort of strategic advantage, is that it fuels speculation, and some of that speculation doesn’t help Apple. Sure, Apple doesn’t talk about iPod sales, but you know they are going down, and that was indicated in Tuesday’s conference call. That’s to be expected, but you’d think Apple would want to put its best face forward with the Apple Watch, and demand that exceeds supply is something good. That reasonable estimates show Apple garnering the vast majority of the smartwatch marketplace in just nine weeks, despite the backlog, is evidence enough of the product’s potential.

    Even if early sales were as bad as some proclaim, that wouldn’t do the Apple Watch in. Apple is clearly in for the long haul, and the product will continue to get better even before the next version is out. WatchOS 2 is currently under development. When it comes out this fall, it will allow apps to run natively and tap important hardware functions, such as the Taptic Engine, Digital Crown, accelerometer, heart rate sensor, speaker and microphone.

    Nothing about the next WatchOS should come as a surprise, since it’s clearly detailed on Apple’s site, and was discussed during the WWDC keynote last month. But you have to wonder why the media is still complaining about the supposed lack of apps — there are 8,500 now according to Apple. One long piece in The New York Times made a deal about the lack of a Face-book and Gmail app, among other things, asserting developers are waiting to see how the Apple Watch will do before committing.

    Maybe they are waiting for WatchOS 2, so they can build native apps with more features. That would seem to make a lot more sense, but the reporters for the alleged newspaper of record don’t seem to grasp that distinction.

    In any case, the key test for the Apple Watch will be the holiday season. With WatchOS 2, more dealers, and perhaps loads of third-party watchbands, the true potential of the product may be demonstrated. But Apple still needs to reveal sales figures without excuses. As you see, not revealing those figures has only fueled unfounded speculation. It certainly didn’t help the stock price.



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