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Apple’s Planned ‘iWatch’ Could be More profitable Than TV

*from, Mar. 4, 2013 (To view original article click here.)

Take Away #1: Despite Tim Cook dropping hints that Apple Inc. is hard at work on a television, the company’s smart wristwatch-style device, still in development, may prove more profitable.

Key Facts and Figures:

  • The global watch industry will generate more than $60 billion in sales in 2013.
  • The TV industry will generate $119 billion this year.
  • Gross margins on watches are about 60%, four times bigger than for televisions.
  • A 10 percent share for Apple in each market would mean a gross profit of $3.6 billion for watches, outstripping $1.79 billion for TVs.
  • “This can be a $6 billion opportunity for Apple…,” said Citigroup Inc. analyst Oliver Chen.

Take Away #2: Apple’s efforts are focused on the ‘iWatch’ which may perform some of the tasks now handled by the iPhone and iPad.

Key Facts and Figures:

  • Apple has a team of about 100 designers working on a wristwatch-like device.
  • 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.
  • Features under consideration include letting users make calls, see the identity of incoming callers, and check map coordinates, as well as a pedometer and sensors for monitoring heart-related data.
  • Apple is seeking to introduce the device as soon as this year.
  • To accommodate the smaller screen of a watch, Apple could adapt its iOS mobile software to limit what information is sent to the wrist device.

Take Away #3: Past attempts to create smart watches haven’t gone far, but the timing looks better now.

Key Facts and Figures:

  • Microsoft Corp. signed up partners in 2003 to build products that deliver traffic, sports scores and weather reports, but the effort fizzled by 2008.
  • Recent start-up Pebble Technology plans to sell watches that work with Apple and Google Inc. software, raised more than $10 million on the crowd sourcing site Kickstarter.
  • Martian Watches and Meta Watch Ltd. are trying similar approaches.

Take Away #4: The ‘wearable’ battle may be upon us as Apple’s watch foray opens up a new front in its competition with Google. However, Apple has proven its ability to move into mature markets before.

Key Facts and Figures:

  • Google is developing ‘Google Glass’, a computing device that resembles spectacles and is worn on the face.
  • Before Apple created the iPhone, cell phone makers were enjoying record sales of devices based less on technological innovation than on fashion and brand.
  • Apple’s iPhone 5 was the best selling smartphone in the fourth quarter.

Take Away #5: The watch business is experiencing a renaissance reminiscent of the cell phone industry before the iPhone.

Key Facts and Figures:

  • Shares of Fossil and Movado Group Inc. (MOV) have more than tripled since the end of 2009.
  • Both companies enjoy gross margins greater than 55 percent.
  • Swatch Group AG (UHR) surged to a record last month after reporting accelerating profit growth.
  • Such gains lessen the incentive for companies to incur the costs and risks associated with bringing out more technologically capable smart watches.
  • Apple’s advantages include its brand and retail outlets, as well as its ability to drive down prices of components.

Take Away #6: If Apple can successfully merge fashion with function, its success in the watch business could provide some relief from gross-margin pressure that has dragged on shares.

Key Facts and Figures:

  • The company is searching to compensate for slowing sales of the iPhone, which has gross margins of around 55 percent, roughly twice that of iPads and Macs.
  • An Apple ‘iWacth’ could could carry margins as high as those of the iPhone.
  • However, coming up with a single watch to appeal to millions will test even Apple’s design mettle.
  • An Apple watch could triple the size of the watch business in a year or two. They have the opportunity to get everyone that owns a cell phone to go out and buy another watch.

*To view original article from click here.

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