Apple – The wrong wrist

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Watch expectations are already beginning to fall.

• The hype surrounding the Apple Watch is beginning to suffer from a healthy dose of reality causing the loftiest estimates to start falling.
• The range of sales estimates in the first 12 months is huge with the most bearish on less than 10m units and the most bullish on 100m.
• Consensus is somewhere around 40m which is double RFM’s generous estimate of 20m.
• The problem is that the reviews of the device are beginning to come in and a clear trend is emerging.
• The Apple Watch is a nice piece of kit but it is not a must have is the opinion of most reviews and this theme is being echoed by the surveys being done to ascertain consumer purchase expectations.
• Importantly, the battery life is much better than I expected and can comfortably do a day’s use without having to be recharged.
• This assumes that fitness tracking is not used because when it is switched on, it substantially increases the power drain on the battery.
• This battery life is in line with the Microsoft Band which is not as elegant but has the same functions and costs half as much.
• A BMO survey has found that less than 1 in 10 people who own an iPhone 6 or iPhone 5s intend to buy an Apple Watch.
• Furthermore, one of the biggest draws for the device is fitness tracking for which there are many other, just as good, but cheaper options.
• I think the biggest problem is that Apple has targeted the wrong wrist.
• By designing it as it has and naming it the Apple Watch, Apple has ensured that it must be used as a replacement for the wrist watch.
• Users will feel very foolish with an Apple Watch on one wrist and a regular timepiece on the other.
• Other offerings like Fitbit, Microsoft, Misfit and so on are targeting the empty wrist and their products are designed and sold accordingly.
• As result users don’t feel foolish wearing one of these products as well as a wrist watch whereas Apple has to convince users to consign their beloved timepiece to a drawer.
• Apple has failed to come up with a killer use case for a wrist mounted computer and as simply come up with a series of gimmicks where the novelty is likely to quickly wear off.
• Apple will outsell its wearable rivals by a very wide margin but it will do this on the power of its brand and its design alone.
• This is not enough to sell in anything like the volume that the biggest bulls are predicting and I see further cuts to estimates coming.
• Consequently, I am sticking to my 20m forecast for the first 12 months and see the potential for some sogginess in the stock as reality sets in.
• Microsoft and Google remain my preferred ways to gain exposure to the mobile and digital ecosystem space.