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iWatch could bring $2.3bn a year to Apple, but may be a 'grave mistake'

Karen Haslam | March 25, 2013
Analyst thinks iWatch could be good revenue stream for Apple, reports suggest that it might not have the kudos necessary.

apple's iWatch

Sanford C. Bernstein analyst Toni Sacconaghi reckons Apple could capture an additional $2.3 billion of cash flow a year if it started selling a $250 iWatch.

However, a number of reports have appeared suggesting that iWatch may not be the best path for Apple. Forbes suggests that the wristband smartphone accessory will not have enough kudos attached for it for Apple; and Fortune thinks that the watch market is too low-margin to be worth Apple's effort.

Sacconaghi said: "The successful introduction of the [iWatch] device could illustrate that innovation remains high at Apple and underscore the option value of owning Apple as a platform company - ie, having a large and loyal iOS installed base that Apple can sell additional products and services into," writes Forbes' Haydn Shaughnessy.

He concedes that: "If any company can make a success of a smart watch, it is Apple because Apple will explore the use-case more fully that its competitors could."

However: "I cannot believe Tim Cook will want a legacy of people checking their watches every five minutes. An iWatch will not revive its [Apple's] reputation for innovation and it's easy to read the figures as a gouge on existing customers."

"Apple needs to think of its next generation of products. If it is a wristband smartphone accessory, how much kudos will come with it? Next to none. On the other hand there is a bridge to be built between computing and wearables," suggests Shaughnessy, suggesting that Apple should instead market its own line of clothing.

iWatch will be a "grave mistake"

It will be a "grave mistake" if Apple (and Samsung) enter the "low-margin cellular accessory market" writes Fortune's Cyrus Sanati.

Sanati notes: "The competition is fierce and the barriers to entry are incredibly low."

He adds that an iWatch is likely to appeal only to a "limited subset of consumers of unfashionable geeks and pudgy weekend warriors."

Sanati also makes the observation that: "Your supposed smartwatch would be pretty dumb without a smartphone in close proximity."

A dumb watch

The iWatch wouldn't actually be Apple's first entry into the watch market. There was an ecosystem of watch straps which sprung up around the iPad nano leading Apple to ship a number of software watch faces with the device. The company has now stopped shipping the watch shaped nano.

"Why didn't iPod nano watch work?" asks a Gigaom report.

"I continued to wear my iPod nano as a watch for a little over a year in all before the novelty of wearing an iPod as a watch stopped outweighing its shortcomings as an actual watch," writes Geoffrey Goetz.


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