Apple Watch Is a Genius Revenue Stream to Create a Trillion-Dollar Company

[MICHAELSD]

High profit margins. Check. Check. Check. Edition gets an extra check.

Customers that will spend potentially hundreds on bands and accessories. Check. (I'm already tempted to buy another Sport band and the Milanese.)

Annual upgraders. Yup, yet another Apple device for customers to upgrade to.

Encourages users to upgrade their iPhones as well.

From a business perspective, the Apple Watch makes an incredible amount of sense. The amount of profit that will be brought in from this new category exceeds the margins of the rest of the company's lineup and will help push Apple towards being a trillion-dollar company.

 

[starbot]

Great, another genius analyst who actually knows nothing more than the obvious..

Anyway, yes the product has high margins... but I think you forgot the elephant in the room. Volume.

Other genius analysts are pegging the product as a 3% contributor to revenue stream. Double that and you still end up with nothing.

A product, especially in its infancy, can have other goals aside from pure revenue. I think it will be successful, but let's be real, it's not a $250 billion product as you suggest (current market value of AAPL stands at $750b).

 

[Michael CM1]

I'd agree with a lot of that. But I don't think you'll be seeing annual upgrades even if Apple puts out new models each year. This is likely more compared to an iPad, which really takes a few years to compel you to upgrade.

But watch bands, yep. I got the sport band for cheapness and use whenever doing more active stuff. It's a good workhorse band that you won't cry over messing up. But damn I want one of those leather loops and Milanese loops. I especially like how they're easier to put on than the sport band.

I'd personally rather spend my money on these actual products from Apple or a third-party seller knowing where they're making some money compared to not really knowing what data mining Google will do with Android Wear (or is it Gear?). Google already scans Gmail. Facebook inhales every cookie you own to throw ads up from sites you visit. The Touch ID requirement of Apple Pay also seems more secure than Google Pay, which lets you just use a code. Yes, the Apple Watch does the same thing when you put the wrist on, but the phone it's attached to requires Touch ID to access.

 

[MICHAELSD]

Great, another genius analyst who actually knows nothing more than the obvious..

Anyway, yes the product has high margins... but I think you forgot the elephant in the room. Volume.

Other genius analysts are pegging the product as a 3% contributor to revenue stream. Double that and you still end up with nothing.

A product, especially in its infancy, can have other goals aside from pure revenue. I think it will be successful, but let's be real, it's not a $250 billion product as you suggest (current market value of AAPL stands at $750b).

It's not worth $250 billion but it will join the rest of the lineup as a main product that pushes Apple's value to over a trillion over the next ten years.

 

[Infinitewisdom]

I'd agree with a lot of that. But I don't think you'll be seeing annual upgrades even if Apple puts out new models each year. This is likely more compared to an iPad, which really takes a few years to compel you to upgrade.

But watch bands, yep. I got the sport band for cheapness and use whenever doing more active stuff. It's a good workhorse band that you won't cry over messing up. But damn I want one of those leather loops and Milanese loops. I especially like how they're easier to put on than the sport band.

I'd personally rather spend my money on these actual products from Apple or a third-party seller knowing where they're making some money compared to not really knowing what data mining Google will do with Android Wear (or is it Gear?). Google already scans Gmail. Facebook inhales every cookie you own to throw ads up from sites you visit. The Touch ID requirement of Apple Pay also seems more secure than Google Pay, which lets you just use a code. Yes, the Apple Watch does the same thing when you put the wrist on, but the phone it's attached to requires Touch ID to access.

I actually think annual upgrades would devalue the product. A watch isn't something anyone buys annually. I guess Apple could change that if they make the Apple Watch upgrades compelling enough. But I see this having more iPad-like upgrade cycles. And if Apple does obsolete their previous gens too quickly, I could totally see that having an impact on sales.

 

[za9ra22]

High profit margins. Check. Check. Check. Edition gets an extra check.

Customers that will spend potentially hundreds on bands and accessories. Check. (I'm already tempted to buy another Sport band and the Milanese.)

Annual upgraders. Yup, yet another Apple device for customers to upgrade to.

Encourages users to upgrade their iPhones as well.

From a business perspective, the Apple Watch makes an incredible amount of sense. The amount of profit that will be brought in from this new category exceeds the margins of the rest of the company's lineup and will help push Apple towards being a trillion-dollar company.

You forget that while Apple will sell additional watchbands, the market potential is limited by the fact that third-party vendors will also be in competition very soon - most at rather lower prices.

You also ignore the fact that however much Apple may saturate this market segment, smartwatches are a very small market segment. There is potential for that to grow in size, but as we've seen in terms of the genuinely negative reaction from many, a lot of potential buyers have no need of a smartwatch and no 'problem' a smartwatch can solve for them.

As far as positive impact on the iPhone market is concerned, I suspect the only additional sales will be from those who switch from Android to iPhone because they want an Apple watch rather than whatever models are, at any given moment, available in the andriod market. I think those who upgrade their iPhones would be likely to have been doing so anyway.

In terms of a business model for the company, the watch makes a great deal of sense, but not so much for wild speculation on the volume of revenue but because wearable technology is a growing market, and Apple need to be in it early enough to work out what their product strategy will be. In itself, the watch is just the start.

 

[Michael CM1]

I actually think annual upgrades would devalue the product. A watch isn't something anyone buys annually. I guess Apple could change that if they make the Apple Watch upgrades compelling enough. But I see this having more iPad-like upgrade cycles. And if Apple does obsolete their previous gens too quickly, I could totally see that having an impact on sales.

With a $17,000 top model for sale, I can't imagine Apple would want to make it obsolete in 12 months. My guess is the refresh process will be more along the line of computers. It's going to take work to improve battery life and other things enough to justify a new model, so updates whenever enough is ready sounds smartest to me. Go look at an iPhone 6 compared to an iPhone 5 and you can easily see the justification for upgrading every year or two.

It seems like at the worst Apple is going to start out dominating the category. You've got some decent low-end fitness trackers, a decent model or two from Pebble that's not bad for its price. Then you have the Samsung Gear and Android-based models. Gear started out horribly by, among other things, only working on three phone models that were fairly new. I don't think the app selection is on par with Apple's yet and they've had a one-year head start. Some have decent designs, but not as good as Apple's. The price difference isn't vastly huge between the Gear and Watch Sport. That's all kinda moot depending on which cellphone you own, but the Apple Watch seems to be more mature already.

The market itself will be a question mark for years, and who knows if the major ones will ever operate with the others' phones. When Apple can get one out for less than $300, that might really help adoption rates among iPhone buyers. Also, the ability to purchase in store and not have to wait five weeks to get one.

 

[foxkoneko]

With a $17,000 top model for sale, I can't imagine Apple would want to make it obsolete in 12 months. My guess is the refresh process will be more along the line of computers. It's going to take work to improve battery life and other things enough to justify a new model, so updates whenever enough is ready sounds smartest to me. Go look at an iPhone 6 compared to an iPhone 5 and you can easily see the justification for upgrading every year or two.

It seems like at the worst Apple is going to start out dominating the category. You've got some decent low-end fitness trackers, a decent model or two from Pebble that's not bad for its price. Then you have the Samsung Gear and Android-based models. Gear started out horribly by, among other things, only working on three phone models that were fairly new. I don't think the app selection is on par with Apple's yet and they've had a one-year head start. Some have decent designs, but not as good as Apple's. The price difference isn't vastly huge between the Gear and Watch Sport. That's all kinda moot depending on which cellphone you own, but the Apple Watch seems to be more mature already.

The market itself will be a question mark for years, and who knows if the major ones will ever operate with the others' phones. When Apple can get one out for less than $300, that might really help adoption rates among iPhone buyers. Also, the ability to purchase in store and not have to wait five weeks to get one.

the people who buy the gold have so much money that it's like spending a couple bucks. It's a non issue. The apple watch will get a yearly re-fresh, people need to realize & accept it

 

[Michael CM1]

the people who buy the gold have so much money that it's like spending a couple bucks. It's a non issue. The apple watch will get a yearly re-fresh, people need to realize & accept it

I wish I were one of those people. But even if I were, I like the look of the SS version better. Anyway, if Apple comes out with a new one each year it won't bug me as long as the bands are interchangeable for at least a few years. People who want to upgrade will be able to trade in or sell old ones, but at least the bands would still work.

My battery is at 54 percent right now after wearing it from when I got up -- about 2 p.m. since I work about 3 p.m. The life has gotten better each day like I figured. So it would take a lot of improvement to get me to upgrade from this. I haven't seen a good need for a camera unless you can make FaceTime calls well.

 

[placidity44]

In my opinion Apple has the ammunition to get to a trillion dollar market capitalization even without the apple watch. The iPhone's revenue is just unbelievable...not to mention all of the other countries it can and will become saturated in. Apple pay, car play, iPad, Mac, and this may sound nuts but you'll hear it from me first. I strongly believe that the Apple TV will be Apple's ace in the hole. It's a niche product as of right now but if they get a pay subscription service with access to the App Store and iTunes offering integration across all devices much like it already does now it will be another hit product. The Apple Watch will have success but what people don't realize is that it doesn't have to be nor will it be a iPhone or iPad type product. When they hit a trillion...not if. I'd bet anything they will I think the headline should read "Ecosystem." I know it's a little strange but the ecosystem and halo effect is just brilliant.

 

[bushman4]

Definitely add a few billion into the revenue stream. Big item for the holidays. Version 2 may hold more features based on newer iPhone 7 etc .
Only downside is that its not a stand alone item and needs the iPhone nearby to work.

 

[setite]

I predict the yearly refreshes won't sell out. The first refresh will sell out assuming it addresses a first gen gap but the third and fourth watches won't sell as fast. This device is like an iPad where it will be good enough after the first few generations. But yes it is a great contrived product with great revenue stream.

 

[Michael CM1]

Definitely add a few billion into the revenue stream. Big item for the holidays. Version 2 may hold more features based on newer iPhone 7 etc .
Only downside is that its not a stand alone item and needs the iPhone nearby to work.

I haven't seen it as much of a hindrance. Even if battery life wasn't affected, the cellular is going to probably knock the price up $129 or so (that's the iPad premium). I'm usually within a pretty close distance of my phone anyway, and it probably saves a lot of battery by doing most of the work. Plus I can't imagine just adjusting settings on this tiny screen. The Apple Watch app is way easier for that.

It just seems like there's so much integrated between the phone and watch that making a standalone unit would have a lot missing.

 

[hydr]

Great, another genius analyst who actually knows nothing more than the obvious..

Anyway, yes the product has high margins... but I think you forgot the elephant in the room. Volume.

Other genius analysts are pegging the product as a 3% contributor to revenue stream. Double that and you still end up with nothing.

A product, especially in its infancy, can have other goals aside from pure revenue. I think it will be successful, but let's be real, it's not a $250 billion product as you suggest (current market value of AAPL stands at $750b).

Great, another genius analyst who actually knows nothing more than the obvious..

Fact is Watch is about the least margins Apple have on any physical product. According to the last conference call it is estimated in the low 20%.

 

[Mac 128]

According to this CNet article there are about 94 million iPhones in use in the US -- 8 million are the 4S, so only about 86 million.

http://www.cnet.com/news/nearly-100m-iphones-in-use-in-the-us-new-study-shows/

Let's say every Apple iPhone user in the US with a compatible iPhone, buys an Watch by the end of the year assuming Apple could make them, that's only 51 billion, gross, and if their margins really are only 20%, that's only 10 billion in revenue. Even if you double that to account for the compatible international market, that's still only 20 billion.

At that rate it's going to take a LONG time to hit a TRILLION just from watch revenue.

And the reality is Apple will be lucky to sell even 15 million watches worldwide by the end of the year. So sorry. It's just not gonna happen.

 

[cube]

A company whose products I don't care about.

 

[Mildredop]

will help push Apple towards being a trillion-dollar company.

Shares seem to have dropped since the Watch release. In the last month alone it's gone from $713bn market cap to $605bn.

A $108bn drop doesn't seem too good to me.

 

[Enygmatic]

Shares seem to have dropped since the Watch release. In the last month alone it's gone from $713bn market cap to $605bn.

A $108bn drop doesn't seem too good to me.

Not the first time it's happened; won't be the last. When the game involves "experts" and their colonically-produced estimates, knee jerk reaction investors, and a global market, you get huge fluctuations. They'll be righting that $605B ship in a few weeks.

 

[maflynn]

Shares seem to have dropped since the Watch release. In the last month alone it's gone from $713bn market cap to $605bn

I don't about share prices but back in May when the thread was created the hype machine was in overdrive. Now that reality has set it, I think everyone's expectations and realizations have come back to earth. The Apple Watch is not going to be the next iPhone, at least not yet (and maybe never). Yet with that said, I think its a solid product that will find a niche. The size of that niche is anybody's guess. Since Apple is resistant to release sales figures.

 

[mcdj]

Apple is rich enough that the Apple Watch could literally be nothing more than a bone thrown at Jony Ive to keep him from retiring.