Global Markets

Apple’s iWatch: boom or bust?

25 June, 2014 | Posted By: Oren Laurent

By Oren Laurent
President, Banc De Binary

Rumours have been circulating all week about Apple’s smartwatch, the tech giant’s first serious venture into wearable devices. Tech-savvy traders must now decide how to best react to the murmurs and the market anticipation.
According to industry insiders, Apple plans to release multiple versions of its “iWatch” (as the media are calling it), launching as early as October this year. The product will directly compete with Google, Sony, Samsung and a number of start-ups who have also turned to smart watches and wearable devices. The firms hope to profit from this new market of small sensors, flexibility screens, and wireless connectivity between devices. Apple’s watch is reported to include a 2.5-inch touch screen and wireless charging.
Is there enough consumer demand, however? After all, even the most basic phone can tell the time. Just 2 mln smartwatches were purchased last year according to Strategy Analysis. That’s a tiny fraction of the 50 to 60 mln units that Apple aim to sell in the first year of its product’s release, according to reports in Reuters and the Wall Street Journal.
It is of course possible that Apple’s estimates are overly keen as part of its attention-grabbing marketing strategy. Nonetheless, there is sufficient reason to believe that if any firm can break so strongly into this market, and in effect create the market, then Apple can. CEO Tim Cook has pledged to push wearable devices, stating at a conference last year that “there are lots of gadgets in this space right now, but there’s nothing great out there.”
Apple’s thinking seems to be to outdo similar products by producing not simply a watch but a health and fitness accessory. Aside from its incredibly loyal fan base, the company’s ability to design both software and hardware will give it a competitive advantage, as well the fact that it has reportedly hired several designers and engineers from the fashion and medical industries. It is said to be working on using as many as ten advanced sensors to track data such as blood pressure and hydration levels. A report on the 9to5Mac blog reveals that the firm is employing professional athletes to test the features on its upcoming device, leading to speculation that the same sportsmen will also help to promote the end product.
Talk about the watch will feed the appetites of investors who have been questioning what Apple’s next major product launch will be. It indicates that the firm is not simply relying on share buybacks and stock splits, but is also returning to its innovative roots in order to increase its share price.
At present, Apple is set to grow earnings by over 10% this year, but that figure could certainly fluctuate. Although the iWatch could be an added source of income to compensate for the slowing growth in tablet and phone sales, it remains to be determined exactly how strong the sales of the product will be. Over the coming months, as more details about the device is leaked, including functionality and price points, traders should watch out for data on consumer demand and realistic sales targets.