Can Apple Really Sell 65 Million iWatches in 2014?

Apple (NASDAQ: AAPL  ) is rumored to release its highly anticipated iWatch in the third quarter this year, and the company is targeting shipments totalling 65 million units, according to Economic Daily News via DigiTimes.

Unlike more recent product launches like the iPhone and iPad, where Apple had a first mover advantage, Apple is entering a market with established players. Samsung (NASDAQOTH: SSNLF  ) notably released the Galaxy Gear last year, and is already on its second generation of the device. Additionally, Google (NASDAQ: GOOG  )   (NASDAQ: GOOGL  ) recently announced Android Wear and released a preview software development kit, so developers can get started working on watch apps.

Moreover, 65 million units is just a massive number of devices. Can Apple really sell that many units in a competitive environment?

How did the iPhone and iPad do?
As mentioned, the iPhone and the iPad had the advantage of establishing a new market. As a result, competition wasn't as much of a factor as it will be if and when Apple launches the iWatch.

Nonetheless, sales weren't anywhere near 65 million units in the first six months after launch. The iPhone sold 1.4 million units in its first three months and another 2.3 million units in the following three months. The iPad did better, selling nearly 7.5 million units in about six months.

Granted, there were several factors holding back sales. First was the price. These devices were originally priced well above what most consumers were used to paying for "comparable" devices -- the iPhone in particular. Additionally, iPhone sales may have been held back due to carrier exclusivity.

Perhaps a better comparable would be the iPod. The iPod was far from the first mp3 player, but was certainly the best in class. In fiscal 2002, almost exactly one year of iPod sales, Apple sold $143 million worth of iPods. That's about 350,000 units.

If these past launches are any indication, Apple may have the biggest launch of its history, but it won't come close to 65 million this year.

What's changed?
Since the launch of the iPod, a lot has changed at Apple. The company has gone from selling a few million computers every year to selling hundreds of millions of devices every year. In fiscal 2013, the company sold 264 million units across the iPhone, iPad, Mac, and iPod segments. In fiscal 2002, the company sold 3.1 million Mac units, no iPhones, no iPads, and approximately 350,000 iPods.

In other words, Apple has a much bigger market presence today than in the past. It's a global brand, and its reach has never been greater. All this means that the company can better sell a new product launch.

The market isn't that big though
Samsung shipped 800,000 units of its Galaxy Gear smartwatch in the first two months after launch. Whether those shipments represent actual sales is unclear, but Samsung claims it's the most sold wearable device on the market.

It's been about six months since the launch, but even if Samsung kept up that early pace -- although recent studies regarding used smartwatches would indicate it's unlikely -- that's still just about 2.5 million units.

When it was revealed that the next generation of Samsung's wearable would feature Tizen OS instead of Android, Google was quick to respond. It pushed out Android Wear, and LG will be the first to utilize the new OS when it releases its smartwatch in July.

According to research from the Consumer Electronics Association, smartwatches are only expected to produce $177 million in revenue during 2014, which clearly conflicts with Samsung's numbers. Meanwhile, fitness tracker sales are expected to reach $1.15 billion this year.

Even combining the two markets, there's not enough room for 65 million iWatches without significant expansion.

Big, but not that big
The iWatch could be a hit and still not reach 65 million units by the end of the year. It should be noted, however, that the iPad accounted for about 7.6% of sales in the year it was launched, so a similar ratio would put iWatch sales around $15 billion in 2014 based on analyst estimates. That number could easily account for 65 million units.

I have my doubts, though. There's no indications that the market demand is there for that kind of supply. But if any company could sell that much, it's Apple.

Face it, wearable computing is biggest thing to come out of Silicon Valley in years
If you thought the iPod, the iPhone, and the iPad were amazing, just wait until you see this. One hundred of Apple's top engineers are busy building one in a secret lab. And an ABI Research report predicts 485 million of them could be sold over the next decade. But you can invest in it right now... for just a fraction of the price of AAPL stock. Click here to get the full story in this eye-opening new report.


Read/Post Comments (8) | Recommend This Article (0)

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 April 08, 2014, at 2:26 PM, jdmeck wrote:

    Not going to happen and I doubt it's even an accurate number.

  • Report this Comment On April 08, 2014, at 2:32 PM, garysund wrote:

    My thinking is much would depend on what a IWatch would have to offer as a companion to the IPhone. If there were enough whistles and bells and it is a attractive device, a huge amount of Apple fans could rush out and buy on. A good price point on the product would help too. Could just be another great product to add to Apple's bottom line if it turned out to be popular. I can already picture in my mind the lines around the block at the Apple store for the watch. A nice touch could also be you get the watch either free or at a great discount if you buy the IPhone 6. Could be a great marketing gimmick to sell millions of new phones.

  • Report this Comment On April 08, 2014, at 2:55 PM, twolf2919 wrote:

    Common - that DigiTimes article can't even get its title correct (it claims an iWatch release in 3Q13 - uh - that should be 3Q14!)

    To the author: do you really want to write an article based on an unsubstantiated rumor from a site that doesn't even bother to proof-read its title? Common!

    65 million makes no sense whatsoever - even if 10% of all iPhone users go out and buy one right away (keep in mind that only iPhones capable of BT LE will be able to make use of such a watch). There aren't 650 million iPhones capable of being companions to such an iWatch!

  • Report this Comment On April 08, 2014, at 3:56 PM, Caligula wrote:

    Great way to slam Apple, tout a pie in the sky number some analyst pulled out of his behind and then declare Apple will have failed unless they meet it.

    Tell me any other company that's releasing a watch expected to sell more than, say, 10 million units in its first six months, and I'd be significantly surprised.

    I love the way Wall Street insists that Apple must either be a completely blowout success or the dog of the market at any given point, but never a fairly valued company within its own sector, a sector in which it is highly successful.

  • Report this Comment On April 08, 2014, at 4:00 PM, riwaterman wrote:

    "but Samsung claims it's the most sold wearable device on the market."

    it is also probably the MOST RETURNED electronic device on the market.

    So there is lots of traffic to stores thanks to Samsung's Gadget.

  • Report this Comment On April 08, 2014, at 4:18 PM, twolf2919 wrote:

    @Caligula,

    Although I agree with your general sentiment, it wasn't Wall Street expecting 65 million iWatches - just some rumor mongering by DigiTimes and regurgitated by this blogger (note that I no longer call it either journalism or analysis - since clearly neither was at work here).

  • Report this Comment On April 08, 2014, at 4:39 PM, adamlevy wrote:

    @Caligula I'm not slamming Apple in this article. I love Apple, and own shares.

    I'm pointing out that people should temper their excitement as these big numbers start floating around for a product that isn't even announced.

    I said, "The iWatch could be a hit and still not reach 65 million units." Apple could very well make the best selling product in the market, and it's probably not going to sell that many units. The market just doesn't have the demand to fill yet.

    I think a wearable like the rumored iWatch is a smart move by Apple, as it's a growing market and it fits into Apple's product ecosystem nicely.

    @twolf2919 Yes, I pointed out that it's a rumor in the first sentence of this piece, and go on to dissect why investors should NOT expect Apple to sell that many iWatches.

    P.S. No one would say that the iPod, iPhone, or iPad are flops, but they didn't sell nearly as many units in their first few months.

  • Report this Comment On April 09, 2014, at 9:48 AM, bshamblin wrote:

    1. The article is quoting shipment numbers, not sales. Big difference.

    2. The article presents the target, but not the time frame.

    3. The headline "The market's not that big thought" is ridiculous - nobody knows how big the market will be. Using Samsung as an example is a stretch - nobody really knows what features the iWatch will have - or if the features of the iWatch and Samsung product are in any way similar.

    4. Morgan Stanley analyst Katy Hubert estimated that an Apple iWatch could generate as much as $17.5 billion in its first year. Assuming a $365 price tag puts the "estimate" of units sold at 34 million.

    5. One reason for the high unit estimates - the iWatch is expected to be tethered in some way to the iPhone. There are currently 550 million iPhone users.

    A little analysis goes a long way...

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2907369, ~/Articles/ArticleHandler.aspx, 10/21/2014 2:56:40 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement