Apple Watch: Timely idea or clocked out?

NEW YORK: Apple is a habitual party crasher, but can the company's history of arriving late and making a big splash in various gadget categories continue with the Apple Watch? 

The technology company was a late entrant into many of its most prominent product categories: The iPod wasn't the first digital music player and the iPad wasn't the first tablet. But in most cases, the innovation the company infused into its devices ignited previously dormant markets — and Apple products became "must haves." 

Smartwatches have been around for a few years, but makers such as Samsung and Sony have failed to make them a runaway hit. 

Apple's stated entry into the smartwatch arena this week with a gadget that won't go on sale until early 2015 raises questions: Can the company work its magic as it has in the past and convince people that they really need a smartwatch -or will this time be different? 

Experts say Apple is likely to stimulate interest in smartwatches, but they contend that the company must overcome a few hitches before its device can succeed. 

Wearable devices is a small but growing area that technology companies are hoping to capitalize on as the smartphone and tablet usage grows. Citi Investment Research estimates the market for smartwatches will be $1.4 billion to $1.8 billion this year and could grow to $10 billion by 2018. 

But no company has cracked the formula for a mass-market success. The entire "wearables" category includes sport fitness bands, watches and other apparel -everything from Fitbit's $99 Flex fitness tracker and Nike's $99 Fuelband fitness monitors to Samsung's $199 Galaxy Gear smart watch. Experts say the Apple Watch's real test will come when developers begin to develop apps for the gadget, which is Apple's first brand-new product introduction in four years. 

"What separates Apple from the others is partially the design itself -it's a lot more elegant than other offerings- as well as the Apple ecosystem and (software) developer opportunity," said Susquehanna Research analyst Chris Caso. 

Forrester analyst James McQuivey said some Apple Watch features, like the controller knob on the side and the emphasis on different watch sizes and style options for watch bands and clasps, could help the watch stand out. 

"Apple has unique strengths to make something elegant and attractive," McQuivey said. He compared the Apple Watch to Apple's earlier innovations like the iPod and its trademark white earbuds. 

"They made it something you wanted to be seen carrying," he said. "You have (an iPod) just to make people see that you have it. Even people who didn't buy it knew what it was." 

McQuivey predicts a successful launch but not quite as big a launch as Apple's iPad. He believes the company will ship 10 million units by the end of 2016. 

"You only need 10 million to hit that tipping point, then millions of more people will want one suddenly," he said. 

By comparison, research firm IDC forecasts that about 4 million smartwatches will be sold this year, more than double the 1.7 million sold in 2013. The top brands are Samsung and Pebble. 

Canaccord Genuity analyst Michael Walkley gives an even rosier outlook, forecasting 14 million will sell during fiscal 2015 and 25 million in fiscal 2016. 

"We believe our estimates could prove conservative, as we were impressed with the design, user interface, and features included in Apple watches," he said in a client note. "We believe the fitness and health features are the most compelling in terms of driving sales of the new product category for Apple and could also drive stronger demand than our initial estimates." 

Even so, there are a few sticking points that could keep the device from being a success. The first is its price tag, which starts at $349. Several analysts said that's more than they were expecting. 

"There may be consumer concern about the price," said eMarketer senior analyst Cathy Boyle. "It's going to catch a lot of people's attention, but adoption is going to be gradual."





A slow build won't necessarily doom the product. iPhone sales started slow in the device's first year on the market. Apple sold just 5.4 million iPhones between mid-2007 and the summer of 2008. More than 550 million have been sold as of June. With the iPad, Apple sold 19.5 million tablets in the first year on the market. More than 225 million iPads have been sold. 

The Apple Watch faces a few other problems: lt's unclear how long the battery lasts and the watch won't ship until early 2015, disappointing those who were hoping to get or give one as a holiday gift. It also has to be tethered to an iPhone via Bluetooth for some functions, including GPS. 

"The lack of GPS or Wi-Fi natively on the device will require an iPhone to be nearby for most tasks, which both limits some near-term use cases," said Raymond James analyst Tavis McCourt. "But it provides ample fodder for upgrade opportunities in the future." 

The long lead time before the product ships could mean the device will be more functional once it's released, since app developers have more time to create apps specifically for the watch. And Apple is loading the device with fitness apps and an Apple Pay digital wallet service that might appeal to some consumers who are on the fence. 

"The intention (of showing the watch months before it ships) is to show the developer community they have an elegant industrial design, but to make it really useable and exciting you have to have apps for it," said Susquehanna Research analyst Caso. "Apple is playing the long game here for sure."

Looking for the missing 'i' in Apple Watch

SAN FRANCISCO/NEW YORK: Apple's launch was a marketing extravaganza stuffed full of gadgets, corporate hyperbole and celebrities of every stripe. One thing was missing — the "i" in front of the Watch.

Apple's prefix has anchored the brand names of generations of products, from its phone to the iPad. But in announcing "the next chapter of Apple's story", CEO Tim Cook chose to call an apple an apple.

The company that spends hundreds of millions of dollars marketing and advertising its gizmos does not do things without careful deliberation. Some branding experts say Apple chose that foreshortened appellation both to distinguish its first new device in four years and send a message to the public that it was moving into new territory.

Others say the absent alphabet may signify the Watch's positioning for now — as an accessory and companion to the iPhone, which it requires in order to work, rather than a product that exists on its own merits.

Apple did not respond to a request for comment.

"They are looking down the road," said Robert Passikoff, president of Brand Keys, New York-based brand research consultancy.

"The watch is going to be an adjunct to a lot of other things that will still have the 'i' attached to them. All of this wearable technology stuff really isn't stand alone."



"It becomes more of an app attachment than a single product," Passikoff said.

But Watch may carry higher stakes for the company and CEO Cook.

Cook, who has labored for years under the shadow of his legendary predecessor Steve Jobs, kept the Watch for last, unveiling the first device to be developed under his tenure with a hint of emotion in his voice. Before the unveiling, he had stressed the historic significance of the Flint Center venue — where a young Jobs unveiled the Macintosh decades ago.

Now, the company that waded into smartphones in 2007 and tablets in 2010 is again venturing into unfamiliar territory, though this time the inherent demand is less than certain. IT research outfit IDC experts predict around 42 million smartwatches will be sold in 2015; Apple sometimes sells that many iPhones in three months.

The financial impact for the company remains unclear, but analysts say the success of the Watch will help restore some shine to its dimming reputation for innovation. In past years, Apple had appeared stuck in an iPhone product cycle, with a new version typically launched in the second half and a more complete redesign only every two years.

That elevates the importance of the timepiece. Marketing chief Phil Schiller once said in court that Apple's strategy, which spends hundreds of millions of dollars on ads, is to "make the product the biggest and clearest thing in advertising."

"It is a new era," said Ellen Leanse, a brand strategist and former senior Apple executive. "It was a highly confident move that signals, pardon the pun, watch us."
"It would have been trite to call it the iWatch. It would have been looking backwards," she added. "This could pave a new path for a product family" like the Macintosh.

Why Apple Pay may not be a game changer

Apple Inc's launch of its own tap-to-pay system using near-field communication (NFC) in its new iPhones and smartwatches may not be a game changer after all.

The success of Apple Pay, unveiled at a gala launch on Tuesday, hinges on the willingness of retailers to use NFC-based payment systems, industry experts said.

So far the technology, which uses wireless technology to transfer data over short distances, has failed to catch on due to the high costs involved.

An NFC-enabled reader costs between $250 and $300. In addition to that, merchants also need to train staff and set up backend IT systems.

Apple is betting on the popularity of its iPhones and the convenience and security of its payment system to prompt customers and retailers to make the shift.

The technology will allow iPhone users to pay for anything from office supplies to burgers at the tap of a button, using their American Express Co, Visa Inc or Mastercard Inc bank cards.

But Apple first needs to swiftly add more retailers such as Wal-Mart Stores Inc and Best Buy Co Inc, which recently stopped accepting payments using NFC terminals.

"At this point we have no plans to accept Apple Pay," Best Buy spokesman Jeff Shelman said.

US retailers have been notoriously slow when it comes to adopting new payment technology.

They are already lagging in the adoption of payment systems that can read chip-enabled credit and debit cards, a move hastened by a massive data breach at Target Corp last Christmas.

Trying to convince them to move to mobile-based payment terminals can be a big challenge.

"Apple's tremendous failure yesterday was in demonstrating anything that was merchant-friendly," said Tom Noyes, chief executive of Commercesignal Inc, a data and payments company.

"There is nothing they showed that wasn't possible seven years ago. There's nothing for the merchants," Noyes, a former Citigroup Inc executive, added.

Apple declined to comment.

Rival systems
Apple Pay also faces competition from Merchant Customer Exchange (MCX) — a consortium of retailers including Wal-Mart and Best Buy - which is developing its own mobile payment platform.

MCX merchants account for over $1 trillion of consumer spending, or roughly a quarter of the total retail spending in the United States, Morgan Stanley analyst Smittipon Srethapramote wrote in a note to clients.

Its members are currently prohibited from accepting all other mobile wallets. Some members have even flipped the switch on their NFC terminals.

Mobile handset makers included NFC chips in about 300 million smartphones last year, a third of all smartphones shipped.

The number of NFC-enabled phones is expected to touch 550 million this year, helped by Apple's devices and an expanding number of Android gadgets, Gartner analyst Mark Hung estimated.

Gartner Research had projected last year that the value of mobile payments by 2017 would be $721 million globally, with only 5 percent coming from NFC payments.

"The economics of NFC implementation for the issuing and acquiring communities have been a challenge, resulting in slow adoption of the technology," industry association Smart Card Alliance said in a report published in November 2013.

Apple Watch is no competition for us: Swiss watchmakers

ZURICH: Apple's iPod upended the music industry, and its iPhone knocked Nokia off its smartphone perch, but Swiss watchmakers breezily dismissed warnings that the technology giant's new wristwatch gadget could do something similar to them.

"They are essentially transient products rather than items of enduring value," one Swiss watch industry expert sniffed.

Franz Tuerler, owner of a luxury watch store on Zurich's main shopping boulevard, Bahnhofstrasse, said the appeal of Apple watches would be to a different class of customer who prizes technology over prestige and emotional attachment.

"I think the Apple Watch will be successful. But it's not competition for the classic Swiss watch industry," Tuerler said.

While the luxury end of the market might feel itself well insulated from the blast of competition from Apple, analysts are far from convinced that the industry can be complacent, especially at the more affordable end.

Vontobel watch industry analyst Rene Weber told Reuters, "(Apple Watch) is the first convincing smartwatch, and we believe it will impact the entire watch industry, but mainly at the low-/mid-end price level."

An industry source acknowledged that watches priced between 500 euros and 1,500 euros ($646-1,940) could feel the pinch.

Investors have singled out diversified industry heavyweight Swatch Group, which makes 20% of its sales in the low and mid-priced ranges, as most at risk.

Swatch shares traded 2.5% lower on the Zurich exchange after Apple spelled out its plans to offer three lines of watches — sport, standard and luxury versions — with prices starting at $349 (270 euros) and set to ship in early 2015.

Its shares have lost nearly 18% of their value so far this year, lagging an 8% rise in the Swiss market index, and analysts cite Apple's market entry as the main reason.

The Swiss industry has so far taken a decision not to join but to try and beat the smartwatch phenomenon. Not a single watchmaker has announced a deal with a technology company to work together on a smartwatch project. Swatch has said several times it has all the know how to make 'smart' watches and does not want to be dependent on a partner.

Swatch chief executive Nick Hayek told Reuters in a recent interview that the company prefers to go it alone with a launch next year of watches with smart fitness functions.

Apple Watch, however, will be sending messages, playing music, and acting as a payment medium on top of health monitoring functions. The danger for the watchmakers is if Apple succeeds in redefining what people expect from a wristwatch.

Jean Marc Jacot, chief executive of privately owned Parmigiani, whose watches sell for an average 30,000 euros, does not see that as a threat.

"High-end consumers will buy Apple Watch, because it is Apple, but they should not stop buying classical watches. They will have both," he said.

Apple plans smartwatch and larger iPhones

SAN FRANCISCO: When Apple wants to make a big splash, it returns to its history. 

Thirty years ago at the Flint Center for the Performing Arts, a roomy auditorium in Cupertino, California, Steve Jobs introduced the original Macintosh. On Tuesday, Apple will return to the center to unveil a set of long-anticipated products: Two iPhones with larger screens and a wearable computer that the media has nicknamed the iWatch. 

The so-called smartwatch will be the first brand-new product unveiled under Timothy D Cook, Apple's chief executive, who took the helm three years ago, shortly before Jobs' death. 

It is expected to come in two sizes and combine functions like health and fitness monitoring with mobile computing tasks like displaying maps. It will have a flexible screen and, like the new phones, will support technology that allows people to pay for things wirelessly. 

"I believe it's going to be historic," said Tim Bajarin, a consumer technology analyst for Creative Strategies who attended the original Mac event in 1984. He added, "The design of this product is all Tim's fingerprints." 

Apple, which is highly secretive, has not officially commented on any of the new products. But multiple employees of Apple and its partners who were briefed on the products shared some details on the condition that they not be identified. 

With its first wearable computer, Apple will enter a growing market for fitness-tracking gadgets and smartwatches from Fitbit, Nike and Samsung Electronics. And with the two larger phones, Apple will fight back against Samsung, whose big-screen Galaxy smartphones have wrested sales away over the last few years. 

While the iPhones are expected to be released in the coming weeks, the watch is unlikely to be in stores until next year, several of the people with knowledge of the products said. The price of the new devices is not yet publicly known. 

Some said the smartwatch was one of Apple's most ambitious projects to date. The company put an enormous amount of time and money into designing the wearable device's sensors so that they can track movements and vital signs, like heart rate and footsteps, much more accurately than existing fitness devices, two employees said. 

It has a flexible display panel that is protected by synthetic sapphire, which is tougher than glass, they said. The device's circuit board, which includes its sensors and chips, was described as tiny, about the size of a postage stamp. 

For replenishing the battery, the smartwatch will rely on a wireless charging method. Apple had at one point tested solar charging for the watch, but that experiment failed. 

For software, the watch will take advantage of HealthKit, a set of tools for storing health data that Apple introduced in June. The device will also rely heavily on Handoff, a new software feature that allows users to push content between their Apple devices. 

The bigger iPhones, which have been widely written about over the last year, will come in two screen sizes, one measuring 4.7 diagonal inches and the other 5.5 diagonal inches. The larger version will cost more. Unlike the older iPhones, which have somewhat sharp edges, the new ones have softer, rounded edges similar to those of the latest iPads. 

To deal with concerns that a bigger phone will make typing with one hand difficult (the current iPhone has a 4-inch screen), some changes to the design of the iPhones' user interface will allow people to type or use apps with just one hand; there will be a one-handed mode that can be switched on and off, two employees said. 

The wearable device and the smartphones will include hardware and software that support a technology called near-field communication, or NFC, which allows devices to exchange information wirelessly over very short distances. It could make paying for things with a phone less of a hassle. 

Apple has teamed up with American Express, MasterCard and Visa to support the payment system, said several people involved in the partnerships. With the deal, these people said, iPhone owners will be able to use their devices as a sort of digital wallet, improving their ability to pay for items at select partner merchants without handing over cash or a credit card. 

Along with these partnerships, the abundance of new NFC-enabled iPhones could jump-start mobile payment, which has so far failed to gain traction among American consumers. Google, for instance, released a digital wallet in 2011 that has achieved little success. And Isis — a mobile wallet backed by three major American phone carriers, which was renamed Softcard this week — never caught on either. 



(Apple fans have already started lining up outside flagship Apple Store in New York, USA.)
Some analysts think Apple's entrance into the world of mobile payment will make all the difference. 

"Apple owns the hardware and the software here, unlike Google," said Josh Beck, an analyst with Pacific Crest Securities. "Not to mention Apple has this huge cache of customer credit cards, and an affluent customer base." 

Representatives of American Express, Apple, MasterCard and Visa declined to comment. 

Even though Apple has continued to turn in healthy quarterly profits, investors have clamored for the company to deliver new kinds of products. They worry about the saturation of the smartphone and tablet markets, which could slow Apple's profit growth. 

With the bigger iPhones, Apple will be catering to a growing appetite for big-screen smartphones. IDC, a research firm, estimates that at least 20% of all smartphones shipped last year in China, the largest smartphone market in the world, were five inches or larger. It predicts that manufacturers this year will ship more "phablets," or smartphones with screens measuring at least 5.5 diagonal inches, than laptops. 

The iPhone, which is still Apple's No. 1 source of revenue, will probably continue to be a cash cow. But Bajarin of Creative Strategies said the wearable device could also become a significant source of profit for Apple and could appeal to gadget and fitness enthusiasts as well as health care companies and people with chronic ailments. 

"I would not underestimate the incredible earnings potential that could come from a wearable that really catches the fancy of the customer," he said.