The Apple (AAPL 0.48%) Watch, which is expected to launch with a starting price of $349 next year, is probably the most eagerly anticipated wearable device of 2015.
But the high-end smart watch market is uncharted territory, since the average price of a smart watch hovers around $189.. A recent survey from ON World also found that only 8% of respondents said they were willing to spend over $299 on a health-tracking smart watch.
However, two unlikely challengers -- Intel (INTC 0.58%) and Hewlett-Packard (HPQ 3.84%) -- recently entered the $300+ market for wrist-worn smart devices with two luxury offerings. Intel partnered with high-end retailer Opening Ceremony to launch MICA (My Intelligent Communication Accessory), a smart bracelet for women adorned with snakeskin and precious stones. HP partnered with online retailer Gilt and designer Michael Bastian to launch Chronowing, a smart watch that resembles a regular watch. "Designed as a gentleman's watch," is how Gilt describes it.
MICA, which is equipped with a 3G antenna, costs $495. The Chronowing is available in a $350 version and a black "limited edition" $650 version. Will these new devices steal Apple Watch's thunder before it arrives, or will they quickly fade away?
Why Intel's foray into wearables tells us
Intel's MICA, which is coated in 18-karat gold with a curved sapphire glass display, targets female consumers who might be turned off by blocky and masculine Android Wear devices.
The stylish device features calendar, event, messaging, and call notifications. With TomTom's GPS technology, MICA notifies users that it is "time to go" by calculating the time needed to travel between appointments. It can also search through nearby businesses with Yelp integration. However, it lacks any biometric health-tracking features.
Intel will completely subsidize the MICA's 3G data costs through AT&T (T -3.79%) for two years with unlimited international roaming. Using AT&T's basic 250MB 3G plan ($15 per month) as a baseline, early adopters could get at least $360 worth of data with a $495 device. This type of margin-crushing subsidization isn't new to Intel. It previously gave OEMs steep discounts on Atom chips for mobile devices and provided financial assistance in redesigning ARM-based logic boards for Atom processors. That strategy caused its mobile chip division to post an operating loss of $3.1 billion in 2013.
While the chipmaker incurred those losses to advance x86 processors in mobile devices against ARM Holdings (ARMH)-licensed chips, Intel surprisingly used an ARM-licensed design in the MICA.
This warns investors that Intel's own x86 chips -- the Quark, Edison, or SoFIA -- might not be suited for all wearables. That revelation is troubling, since Intel aggressively expanded into the wearables market with partnerships with Fossil and SMS Audio, launched its first smart watch, the Basis Peak, (which also likely employed an ARM-licensed design), and inked a partnership to manufacture new chips for Google Glass. Investors who assumed that expansion meant x86 chips could replace ARM-licensed chips on wearables are likely disappointed.
Why HP is dabbling in wearables
HP's core PC business (desktops, notebooks, workstations), which accounted for 29% of its top line over the first nine months of 2014, isn't faring as badly as some investors might believe. During that period, sales of desktops rose 4.6% year over year, sales of notebooks climbed 9.5%, and workstation sales edged up 4.2%.
However, Gartner expects global PC shipments to decline 6.7% year over year in 2014, then slide another 5.3% in 2015 to 261.7 million shipments. Yet shipments of smart watches could skyrocket from 4 million in 2013 to 330 million by 2018, according to ON World's projections.
Therefore, it makes sense for HP to dabble in smart watches to test market demand. Since the $100 to $300 price range is crowded with Android Wear devices, HP decided -- like Intel -- to launch a fashionable high-end device to address common complaints about the bland designs of earlier smart watches.
The Chronowing, which synchronizes with iOS and Android devices, offers basic smart watch notifications, music control, sports scores, and stock tickers. Like the MICA, it doesn't offer health-tracking or multimedia features. Its features might seem spartan, but it lasts a week on a single charge, as opposed to the daily charging that many smart watches require.
Why neither device will steal Apple Watch's thunder
Intel and HP were smart to partner with Opening Ceremony and Gilt to market their smart watches, since it's doubtful that consumers will flock to purchase smart watches branded by the two tech companies.
But both efforts are too timid to make a substantial impact on the market. Opening Ceremony only has five bricks-and-mortar stores worldwide and Gilt is an online-only flash sales site for luxury brands that ranks 411st in popularity among U.S. websites, according to Alexa.com.
Intel and HP apparently believe the midrange market of health-tracking devices will remain separate from high-end luxury watches. Yet Apple is marketing Apple Watch as a fashion accessory with top-tier health-tracking features, which means future devices can serve both purposes. It's too early to conclude how the MICA and Chronowing will fare, but I doubt they will make any noticeable impact on Apple Watch sales.