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Apple Watch buyers pool equals 43% to 60% of iPhone owners

Gregg Keizer | Sept. 11, 2014
If Apple launched its Apple Watch today, between four and six out of every 10 iPhone owners would be able to use the smartwatch, according to statistics from Kantar Worldpanel Comtech and an app analytics firm.

Apple said only that it would ship the smartwatch "in early 2015," but did not narrow the window beyond that.

Another factor in potential Apple Watch sales is its support for Apple Pay, the electronic payment service and corresponding NFC-based touch-payment system Apple said would launch next month in the U.S. Although only the newest iPhones, the 6 and 6 Plus, will be able to use Apple Pay, the smartwatch provides a work-around for older models.

Apple's website states that Apple Pay works when an Apple Watch is "paired with iPhone 5, iPhone 5c, iPhone 5s, iPhone 6, or iPhone 6 Plus." Yesterday, Apple demonstrated how a customer could touch the watch to a payment terminal, or at least bring it within fractions of an inch, to pay for goods at retail — without pulling the phone from a pocket or purse.

It's probable that Apple Watch owners will skew towards the newest models, if only because at the smartwatch's debut the most likely buyers of both it and the iPhone 6 and 6 Plus will be the early adopters and the wealthiest customers. But the inclusion of the iPhone 5 on the Apple Watch support list means that the customer pool for the smartwatch is considerably larger than new-iPhone-only.

Wall Street analysts reacted quickly to the Apple Watch revenue opportunities to update their financial models — if they had not already taken the smartwatch into account earlier based on the strong rumors.

Brian White of Cantor Fitzgerald, for instance, assumed a 20% "conversion rate" for the Apple Watch; in other words, smartwatch sales would equal approximately 20% of iPhone sales in any given quarter. "[That] is reasonable, and less than half the 45% conversion rate for the iPad," White wrote in a note to clients today.

In White's model, that would translate into Apple Watch unit sales of almost 37 million in the first year of availability, with revenue of $12.8 billion, or about 55% of the $23.1 billion that the Mac line brought in over the last four quarters and 41% of the iPad's revenue during that same stretch.

But White's Apple Watch prediction looks a lot better when compared to, say, the iPad's first year: From Q2 2010 to Q1 2011 — the iPad launched in early April of 2010 — the tablet line recorded $12.4 billion in revenue.

Milanesi, who is not a sell-side financial analyst, declined to put a number to possible Apple Watch sales. 'But if I had to come up with a number, I'd look at people who upgrade every iteration," she said today. "Those are not just the early adopters, but those I'd call hard-core Apple customers. They upgrade even if they're still on a contract."


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