A few months ago, you couldn’t move without encountering yet another Apple television rumor. But if you are interested in profit – and what company isn’t – the execs in Cupertino should cancel any HD TV and focus on wristwatches. Turns out, the wristwatch business could be way more profitable than Apple-made TVs.
Rival firms lust after Apple’s huge profit margins. In a potential stroke of good timing, massive margins from the much-rumored iWatch could replace the iPhone – even slacking PC sales, one Wall Street analyst forecasts Monday…
Bloomberg quotes Citigroup analyst Oliver Chen who says wristwatch hardware returns a 60 percent gross profit margin – four times the size of televisions.
“Besides brand and retail outlets, another advantage for Apple is its unmatched ability to drive down the price of components such as displays, batteries and circuit boards,” Bloomberg explains.
This meshes nicely with our longheld belief that anyone getting into the highly-commoditized television set business should get their head examined.
The publication wrote:
Apple seeks to introduce the device as soon as this year, this person said. Apple has filed at least 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 watch designer who developed a line of watchbands for people who wanted to use an iPod nano as a watch.
Bloomberg last month reported that a hundred product designers have been developing a wristwatch-like Apple device that may perform some of the tasks now handled by the iPhone and iPad, adding today:
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.
In Wall Street’s usual dead-pan way of describing huge numbers, Chen said an Apple watch offers “plenty of opportunity for upside.”
Just how much ‘upside’?
Try $6 billion.
To put that into perspective, if Apple grabbed only 10 percent of the wristwatch market, the company would see $3.6 billion in gross profit. By comparison, 10 percent of the PC market would give Apple just $1.79 billion in gross profit.
Some folks disagree.
Peter Cohen of The Loop, for example:
I wonder whether AAPL price will go up or down on the news that one unannounced product will be more profitable than another unannounced product.
Be that as it may, the numbers seem to throw cold water on some rumors which floated suggesting ‘iWatch’ was really a codename for Apple’s HDTV efforts.
The Verge piggy-backs on the Bloomberg story with its own claims:
We’re also told that Apple’s chosen to rework the full iOS to run on the watch instead of building up the iPod nano’s proprietary touch operating system — although the previous nano was already watch-sized and seemed like a great starting point for a wrist-sized device, Apple’s betting on iOS across product lines.
However, running iOS on such a tiny wearable device poses challenges related to its battery life:
The goal is to last at least 4-5 days between charges, but the current watch prototypes are apparently only going for a couple days max.
We’re also told Apple has some work to do with iOS on the iPhone, which currently has several hooks for supporting a watch-like device but lacks the appropriate interface or settings to make it work properly.
But what seals the “iWatch” scenario for me is reports Apple’s design guru Jony Ive is nuts about wristwatches. Along with owning many expensive watches, his minions have supposedly visited wristwatch factories.
Apple design chief Jony Ive has long had an interest in watches. Besides owning many high-end models himself, he had his team visit watch factories and ordered boxes of a sports watch made by Nike Inc. (NKE) in the mid-2000s, said Wilson, who was then Nike’s creative director.
Can Apple remake the ordinary wristwatch into another high tech consumer “gotta have” product?
Maybe they can strap an iWatch onto an outboard motor, like Timex did ages ago.