5 Reasons Why Apple's iWatch Will Fail

Sources are getting chatty again, telling The Wall Street Journal and The New York Times over the weekend that Apple (NASDAQ: AAPL  ) is working on a high-tech watch.

This isn't the first time that we're hearing about a smart watch out of the class act of Cupertino. The iWatch buzz has been bubbling for months. This doesn't mean that we're getting one. Apple's name has been tied to high-def TVs, phablets, and cars in recent months. Even if Apple is actually testing watch designs, it doesn't mean that a device will actually see the light of day.

However, let's assume that the iWatch is coming. The notion that anything that Apple does will magically turn into consumer tech gold will be challenged. Let's go over a few of the reasons why Apple's potential timekeeper may not be much of a keeper.

1. Watches are a hard sell for tech-savvy consumers
Stroll through the halls of a high school or a college campus and you just don't see wristwatches these days. Who needs a one-dimensional watch when smartphones or even fitness bands can tell the time?

This doesn't mean that watches are dinosaurs. They remain popular as fashion statements for adults. The Swiss watch industry posted record exports last year, and fashion-forward players are doing well closer to home. Fossil may have been downgraded by a Benchmark analyst this morning, but the Texas-based maker of stylish timepieces is still expected to grow its sales by 11% this year after a similar spurt through 2012.

However, it still makes this a difficult market to crack when potential buyers will wondering if they really even need a watch these days.

2. Apple may not be the ideal disruptor
A sleepy watch market isn't enough to shoot down Apple's chances, bulls will rightfully argue. Apple rolled out the iPod in 2001 when the Walkman craze had come and gone. The iPhone in 2007 transformed smartphones that were largely popular at the corporate level into a consumer craze.

Apple didn't have a lot of competition as it forged new ground, but that won't be the case with Web-savvy watches.

Pebble raised more than $10 million on Kickstarter last year for its customizable watch that uses Bluetooth to alert Android and iPhone owners about incoming calls, emails, and text messages.

On a larger scale, why will Apple fare any better than Google (NASDAQ: GOOGL  ) ?

As Apple-watching blogs chat about the tech giant possibly introducing a smart watch or even a car, Google already has wearable computing products and self-driving cars out in the wild. Sure, Google has no plans of selling its Web-tethered goggles or its street mapping automobiles, but it's already extending its brand by showing the public that Big G makes these things possible.

The moment that Apple breaks out its wrist hugger there will probably be smarter competition than it has faced in earlier introductions.

3. We can't forget fitness
Apple CEO Tim Cook sits on Nike's (NYSE: NKE  ) board of directors, and he's been photographed wearing a Nike+ FuelBand.

Beyond providing the time, the FuelBand has a sports-tested accelerometer to track calories burned, steps taken, and the proprietary NikeFuel metric that is synced up with smartphone apps via Bluetooth and can be used to partake in immersive goal-oriented games.

With all of that in mind, where does Apple raise the bar? It can't simply slap a bracelet around an iPod nano and call it an iWatch. Apple can't ignore the success of Nike's FuelBand -- and even cheaper FitBit and Jawbone trackers -- as lifestyle bands.

Even if it incorporates Pebble's functionality with FuelBand's lifestyle features, it won't be breaking new ground for too much longer. Until Cook resigns from Nike's board given the conflict of interest, let's assume that Apple's not gunning for the fitness lifestyle market beyond possibly making Nike a default app. That can happen, but it may also limit Apple to Nike's own shortcomings against rival devices that monitor sleep and perform daily diet planning.

4. The iWatch may not be a jack of all trades
The iWatch will probably be more iPod than iPhone, and that should lead folks to question the move in light of two years of declining iPod sales.

Why are sales of Apple's media player sputtering? Well, the likely reason is that iPhones and even iPads do more.

There's no denying that Apple's watch will look great and integrate with its existing family of devices. However, unless it does a little bit of everything, it will be hard to justify slapping an iWatch on one's wrist.

5. Apple will probably price itself out of the market
Pebble and Nike's FuelBand retail for $150. Since the iWatch is unlikely to have 4G LTE connectivity -- because who wants to pay $20 to $50 a month for access on a watch -- there won't be any wireless carrier subsidies to save Apple from having to sacrifice margins here.

Apple can take the high road and aim for a sliver of the market the way it did with Macs when PCs were selling, and it probably will. However, Apple will ultimately have to make a choice between high sales and high margins.

It won't be able to score both, and that's why the iWatch won't change the world.

Time's up?
There's no doubt that Apple is at the center of technology's largest revolution ever, and that longtime shareholders have been handsomely rewarded with over 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.


Read/Post Comments (12) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 11, 2013, at 6:30 PM, jamesblaugh wrote:

    Putting the cart before the horse. Calling the product a failure even though you have no concept of what it will do or look like.

  • Report this Comment On February 11, 2013, at 6:35 PM, daveshouston wrote:

    What an amazing article. Here we have a product review of a product that doesn't exist and is only rumored. The author makes a lot of very questionable presumptions. He then shoots from the hip while blindfolded. What a waste of time reading this.

  • Report this Comment On February 11, 2013, at 6:37 PM, marv08 wrote:

    Why a product you know nothing about, and that has never been announced, will fail? Aargh...

    If you really think Apple would just release a "third screen" with a pedometer, you don't know Apple.

    There is no real mean to "disrupt" anything in the watch space. People with taste and money buy good analogue watches. Apple can't replace these. The price segment occupied by the Pebbles etc. is completely useless for Apple. They don't play there.

    An "iWatch" would only make sense in one of two scenarios: replace the entire iPhone (e.g. by wirelessly communicating with a tablet you are carrying anyhow, so phone calls and messaging, tweeting etc. can be done using only your watch and voice control, optionally with a paired wireless headset), or at least a significant part of it (e.g. put baseband, data and voice functionality into the watch - these technologies do not change that often and do not need to be replaced every two years, and only pair with an iPod touch like device that provides the bigger screen and apps when needed. Using flexible screen technology, one could also do a bracelet-type touch device that could even display and scroll contact lists, the email inbox, etc.

    If it is not in that league, it is not needed. But I totally see how a well-done implementation could be the next big disruption in mobile. (If they pull that off, or if they are even working on that... no idea.) But I will not call it "fail" before I see it.

  • Report this Comment On February 11, 2013, at 6:40 PM, Jeagan1999 wrote:

    Gotta agree with everyone else here...the darn thing isn't even in production yet, and here you are saying it will fail....seriously? I will file this article alongside with "Why the iPod Will Fail", "Why the iPhone Will Fail" and "Why the iPad Will Fail"...Maybe it willl fail, but we won't know until Apple actually starts to sell em'! Sounds like the author of this article needs some "iGlasses"...the kind that cure short sightedness! Oh wait..."Why the iGlasses Will Fail"!

  • Report this Comment On February 11, 2013, at 7:48 PM, cotten999 wrote:

    This is the same guy that said the 2nd generation iPad is going to fail against RIM's PlayBook and Samsung's Galaxy Tab:

    “Your iPad Is So 2010

    Component makers have been telling DigiTimes that mass production of the new iPads may begin as early as the end of January. If that’s the case, the new iPads may hit the market before the first anniversary of the original iPad’s debut in April.

    If so, Apple may be simply trying to get in ahead of Research in Motion’s aggressively priced PlayBook or combat the early success of Samsung’s Galaxy Tab.”

    Rick Aristotle Munarriz, The Street, 29 December 2010

  • Report this Comment On February 11, 2013, at 9:40 PM, marv08 wrote:

    @cotten999: Well, if you want to read something about Apple that is 100% wrong, Rick and Anders Bylund are the safest bets on the Internet nowadays. At least since Ballmer's anorexic and less-sweaty twin (Scott Moritz) has been banished from the street and the clown Dvorak started his final assignment (learning how to fart the Chicago yellow pages backwards).

  • Report this Comment On February 12, 2013, at 7:49 AM, jdmeck wrote:

    You are such an ass. How can you or anyone else say a product will fail before the product is even out, or even exists at all. What a waste of time you are.

  • Report this Comment On February 12, 2013, at 10:33 AM, hkeziah wrote:

    I expect more from Fool.com than this nonsense.

  • Report this Comment On February 12, 2013, at 11:24 AM, guscordova wrote:

    yeah, you sound even worse than those fools calling the ipad a failure back then. (http://webtrends.about.com/b/2010/01/26/5-reasons-why-apples...

    I think if any company can revolutionize any market it would be Apple.

  • Report this Comment On February 12, 2013, at 11:46 AM, TMFBreakerRick wrote:

    @cotten999, I'm all for being accountable, and I realize that some Apple fans and bulls won't agree with this article. However, did you actually read that article where you claim I wrote that Apple will fail? I never wrote that the iPad 2 would fail, and the article was generally flattering about the Verizon addition and pushing out the iPad 2 early.

    http://www.fool.com/investing/general/2010/12/29/your-ipad-i...

  • Report this Comment On February 14, 2013, at 7:52 PM, gmapper wrote:

    Seriously? @TMFBreakerRick obviously has no insight into what this product may be, even if the rumors turn out to have some substance.

    I'm with @hkeziah, I expect this link-bait garbage from some financial web sites, but not from the Motley Fool. What a waste of time!

  • Report this Comment On February 14, 2013, at 7:57 PM, Mccldwll wrote:

    Clueless in Coral Gables (and many have noticed):

    http://www.macworld.com/article/2027910/macalope-they-never-...

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