Many analysts believe Apple (NASDAQ:AAPL) will introduce its rumored iWatch in the next few months. It is speculated to be among the new product categories CEO Tim Cook has promised in 2014. Some investors are underestimating the chances of the new product improving Apple's bottom line. The prospects in the wearable device sector, the potential of the iWatch, and Apple's proven track record of successful product launches will enable the iWatch to equal estimates of even the most optimistic analysts.
The prospects in the wearable device sector
The wearable device market is still in its infancy, but it is growing at a very fast rate. Canalys believes that the sector will become a key consumer technology this year. According to a research from IHS, the global wearable device market will triple to $30 billion in the next four years. If the wearable device market explodes, Apple will certainly make the most of its rumored product.
The potential of the iWatch
Investors shouldn't think of the product as a mere watch. The iWatch is like a lifestyle device with numerous uses. There are millions of iPhones in the world, so an iWatch will be a very valuable accessory. Already, Apple is said to be adding various health features to it. Apple could sell up to 10 million iWatches in the first year, according to a recent survey by Piper Jaffray analyst Gene Munster.
Apple's proven track record
Apple has a proven track record of successful product launches. Each of the company's new products sells more rapidly than the one before it. Apple's iPad accounted for about 7.6% of sales in the year it was launched. Based on the 2014 estimates of analysts, the same trend would put iWatch sales around $15 billion. Morgan Stanley analyst Katy Huberty said the iWatch could bring $17.5 billion in annual sales.
Samsung (NASDAQOTH:SSNLF) is the early leader of the emerging "smart band" end of the wearable device market. Its Galaxy Gear smart watch accounts for the largest share of sales in the sector. Samsung's new-generation wearable features Tizen OS instead of Android. Samsung can expect revenue growth through the sector. Canalys is predicting the smart band segment of the wearable device sector will reach sales of 45 million units by 2017, from an estimated 8 million units in 2014.
When it was revealed that Samsung's new wearable would not feature Android, Google (NASDAQ:GOOG) was prompted to take action. The company has announced its Android Wear, a version of the operating system designed specifically for wearable devices. The company could thrive in the sector. ABI Research forecasts the wearable computing device market will become the norm for many and grow to 485 million annual device shipments by 2018.
Apple investors have traditionally been skeptical about the launch of a new product category. But they shouldn't be skeptical about the iWatch. The prospects in the wearable device sector, the possibilities in the iWatch, and Apple's proven track record may give the product the potential to surpass the expectations of many.
Wearables are here, and there's a clear winner emerging
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Mark Girland has no position in any stocks mentioned. The Motley Fool recommends Apple and Google (C shares). The Motley Fool owns shares of Apple and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.