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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7 Responses to “Fear and Loathing About Apple Watch Sales”

  1. DaveD says:

    Apple stock value continues to follow the time old mantra, “buy on the rumors, sell on the news.” What is wrong with Wall Street when making a sizable profit is not a meaningful value? In addition, holding an Apple stock returns a very good dividends.

    If history is my guide, the iPhone wasn’t a door buster in its first year, but gained a lot momentum afterwards. From the first iPhone to the iPhone 6 that in eight years have shown how Apple has made great strides to be at the top tier of the cell phone pyramid, better quality and user experience.

    The Apple Watch is at version 1.0. Apple knows where the puck is going to be at. Wall Street should be contented that a million plus in sales for a new iPhone accessory in a short period of time is a good sign. As Apple continues to improve on their wearable computer, will those who haven’t worn a watch in years decide that their wrist needs something? Of course, time will always tell.

  2. Viswakarma says:

    The original idea of buying shares (aka stocks) in a company is to provide capital for a company to develop products and to enable the company to grow its revenue. In turn it gives out dividends as an income to the share holders.

    However, this original idea has now been perverted into trading these stocks as though they are baseball cards, and valuing a company’s worth by the value the Gamblers (aka “Investors”) put on these stocks in “Stock Markets”. Thus creating havoc in Economies!!!

    It is similar to what the “Religious Fundamentalists” do to create havoc in Societies!!!

  3. Jim G says:

    What is more curious that I haven’t read from any Wall Street pundits is about accessories for the Watch. Apple is selling a lot of straps and when you think about the prices on them, I’m surprised I haven’t seen that factored into the stock price.

  4. Dfs says:

    I wouldn’t be surprised if the Watch is meeting stiff customer resistance. The problem is the pricing. What’s the next best smart watch that supports the iOS platform? Probably the Pebble. Is the Apple more desirable? Of course. Is it as much more desirable as the price difference suggests? A lot of potential customers might develop serious doubts about this, and as you move up through the respective product lines the doubt gets a lot stronger. Want to pay the twenty bucks that gets you a expansion band for a Pebble Steel or the four hundred that gets you one for the stainless steel Apple? Sure, the Apple one is better, by comparison the Pebble one looks a bit cheesy. But the Apple one sure as hell isn’t anything remotely like 2000% better. At some point it gets impossible to feel the love any longer and you start thinking long and hard about the wisdom of settling for second best.

    The more you look into the smartwatch market the more you discover how grossly out of line Apple’s prices are. They seem to suffer from some corporate arrogance that tells them they are free to ignore the realities of the marketplace and call their own shots however they please. I wouldn’t be at all surprised to learn that these realities are gaining the upper hand. Somebody in Cupertino may need to do a serious reality check.

    • @Dfs, Well, it happens to be true that Pebble, through its entire existence, sold far fewer smartwatches than even the lowest estimates for the Apple Watch in its first 9 weeks on sale.

      It hasn’t proven itself yet, but the resistance would be more about the use case than $349 starting price. Remember that people paid $399 for an iPod in 2001.


  5. Dfs says:

    I sometimes wonder if it might not be better to market a smart watch employing a philosophy the direct opposite of Apple’s do-everything-for-everybody-at-all-costs approach. Not all potential purchasers, for example, are fitness nuts or hypochondriacs and may be totally unmoved by all the biometrics. Focus instead on making an absolutely killer timepiece.

    There are three ways of giving a watch atomic clock accuracy. The first is radio control. But appropriate radio signals are only available in the continental US, Western Europe, China and Japan, which shuts you out of too many markets. And time zone changes and on/off daylight savings have to be made manually, and in the 21st century “manually” ought to be a dirty word.

    Satellite watches can handle time zone changes but daylight on/off still has to be done manually (I recently saw the instructions for one model that required more than two pages to tell you how to do this) and with at least some models there’s a huge battery drain in contacting satellites. Plus which, at least to my eye all the models currently available look hopelessly ugly (I can’t stand multicolored chronometers with way too many complications, and although a dress watch looks fine when you’re dressing down a chronometer or sport watch looks terrible when you’re dressing up, so if you want a single watch you’re better off with a simple, dressy one).
    This leaves Bluetooth connectivity to a smartphone, a technology which neatly sidesteps these problems. With this technology it should not be difficult to make a watch that looks as handsome as a fine Swiss dress watch and is solar powered, fully automated and with an accuracy that blows the finest and most expensive Swiss timepieces out of the water, while bringing it in at a reasonable price. A couple of forthcoming models (Vector, Frederique Constant) already come close to this ideal, but they can’t disentangle themselves from the ideas of biometrics and notifications and are still powered by batteries, and so fall short of what I have in mind.

    So why not make a watch that just does the basic thing a watch is supposed to do, only does it better than any watch currently available at any price?

    • @Dfs, Dana, I have this $12.88 watch from Walmart. After several weeks, it’s still keeping time within 2 seconds of what my iMac shows. That’s good enough for me.

      I realize a fancy watch may improve the accuracy to less than a second, and a purist might care. But most won’t. It’s more about the look, and complications reach a small market unless you just need the stopwatch and such. Well, at least my cheap watch has a stainless steel case and it doesn’t seem to be prone to scratches.

      Obviously, the Apple Watch is highly extensible and WatchOS 2 will just begin to show its long-term potential.

      That and holiday sales.

      It’s really too early to judge where it’ll go.


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