This week Katy Huberty, the Morgan Stanley analyst covering Apple, made a prediction that Apple could sell up to $17.5 billion of its hotly anticipated smart watch in the year of its launch. The basis behind this expectation is a $299 price point and the assumption that most customers who buy it will consider it an accessory for an existing Apple product, at least according to another story on this topic over at CNET.
Obviously these calculations are based entirely on rumors. We don’t know when or if Apple will release an iWatch, but it seems logical that if they do it will have some unique capabilities to make it worth owning, and it will sit at the higher end of the price curve relative to other smart watch devices.
But can Apple really sell a watch for $299? I have to admit that sounds very pricey to me. A watch clearly doesn’t have a screen that is large enough to use for any real content consumption, so I think when people think about what they can get value-wise out of a $299 watch versus … say a $299 iPad Mini, it’s a tough sell.
Yet, if Morgan Stanley is at all close to the mark, Apple will supposedly sell on the order of 58 million watches in the first 12 months. For comparison purposes, Apple sold 51 million iPhones in the holiday quarter that just ended.
Also, if this revenue prediction is true, it means about a 9% boost to Apple’s top line, which is absolutely meaningful. Who wouldn’t jump at a product category that grows the business that much in a single shot and causes (likely) more platform lock-in with customers?
I admit that I’m not a watch guy. I don’t wear one ever. I stopped wearing a watch when I started carrying a smartphone everywhere I went. If you’re anything like me in terms of smartphone use, you look at the screen several times per hour already and a watch serves no new purpose. So for Apple to succeed in this space it’s not about replacing the watch. It’s got to be about making a wearable gadget that brings some important and new value to people’s lives. I’m sure we all have our thoughts on what these values could be, but I’d love to hear your thoughts in the comments area.
Can Apple really justify $299 for a watch? What would it have to do (seriously)?