Smart watch might not be a big hit or even get to market, but developing one is presumably a useful way to get to grips with and play around with wearable device concepts and usage cases. Wearable smart devices (be it watches, vests, spectacles, shoes, whatever) are so obviously going to be a big deal that it would be silly not to explore now. Question is, will they be limited to health care applications such as monitoring physiology and movement, or will they have wider consumer appeal. I suppose the later is what Apple would explore.