Samsung (OTC:SSNLF) announced this week that it has shipped 800,000 Galaxy Gear smart watches in just two months. There was a brief misunderstanding whether that number was sales or shipments, but Samsung has clarified that the number indeed represents shipments.
While the difference between the two is important for Samsung investors, it doesn't matter all that much for companies like Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOGL), which are looking to bring smart watches to the mass market.
Numbers don't lie, but they can misrepresent
So far, the Galaxy Gear hasn't fared all that well in the public eye. Geek.com reported last month that Best Buy had a return rate above 30% for the Galaxy Gear. That's in addition to poor reviews the watch received from David Pogue, formerly of The New York Times, and CNET.
But while the shipment numbers are impressive, it doesn't quite paint a clear picture of the Gear's success, because shipment numbers can be much higher than the number of units that have actually been sold. For example, over the summer Microsoft had to write down a $900 million loss for unsold Windows RT Surface tablets. At some point those tablets were shipped -- but they were never actually sold. Shipping a device is very different from a consumer actually grabbing it off the shelf and purchasing it.
It's only just begun
While Samsung investors should definitely be interested in how many Galaxy Gear smart watches were shipped and sold, the numbers don't hold much sway for the overall wearable tech industry. That's because despite Samsung's numbers, the wearable tech industry is poised to take off. ABI Research has estimated annual wearable tech sales will reach 485 million units by 2018, and Google and Apple are already reportedly knee-deep in smart watch development.
The Wall Street Journal recently reported that Google is in the late stages of developing its own smart watch and that Google Now will play a meaningful part in the device. That could give Google a huge advantage over competitors like Samsung and Apple. Google Now incorporates real-time information, schedules, reminders, and location-based information all into one program. The app easily beats any apps currently running on the Galaxy Gear, and is far more comprehensive than Apple's Siri.
Google's second advantage is that it's one of the only tech players that has significant wearable technology experience. While Google Glass is a different form of wearable than a watch, some of the challenges of battery life, user interaction, and limited screen space are all things Google has had to overcome with Glass, and all that knowledge that can be applied to a smart watch.
Apple has long been rumored to be working on a smart watch as well, and Display Search thinks the company is developing both a 1.7-inch and 1.3-inch model. KGI Securities analyst Ming-Chi Ku thinks Apple's device will launch sometime in mid- to late 2014. The details may be pure speculation right now, but Tim Cook has made statements about wearable tech on the wrist in the past and his preference for wearable tech watches over glasses.
Apple is estimated to have about 100 people working on a possible device. It could compete against other smart watches as a standalone device, rather than having to be paired with a smartphone like the Gear.
Foolish final thoughts
Samsung investors should clearly be looking for the company to report actual sales numbers for the Galaxy Gear, but they should also be patient with Samsung. The company's first step into the smart watch arena may not have garnered the best reviews, but we're still at the very beginning stages of wearable tech and there's lots of time for improvement. Low sales would definitely be a concern for Samsung's investors, but it's not going to dampen Apple and Google's ambitions in the space.