According to well-known Apple (NASDAQ:AAPL) analyst Ming-Chi Kuo (via MacRumors), worldwide pre-orders of the Apple Watch have exceeded 2.3 million units. Kuo's reasoning is based on the fact that many pre-orders won't ship until June and Kuo's internal estimate that Apple Watch production between March and May will come in at just 2.3 million.
Apple plans to expand production
Kuo reportedly said that Apple aims to ramp production up to between 2 and 3 million units per month. If that's the case, then that translates to between 24 million and 36 million units produced on an annualized basis, giving investors some clue as to what kind of unit shipment goals Apple has in mind with Apple Watch.
That said, Kuo is reportedly unsure as to Apple Watch will be "a hit," citing the fact that just 10% of iPhone owners have actually placed pre-orders for the device. For a product category that still has yet to prove itself, it seems like the Watch is off to a good start.
What kind of product mix is Apple seeing?
The report also suggests that the mix of Apple Watch Sport, Apple Watch, and Apple Watch Edition works out to 85%, 15%, and "less than 1%," respectively (clearly there's some rounding going on here). This makes sense given that all of the Apple Watch models are functionally equivalent, with only physical appearance and "prestige" separating the models.
To try to get a handle on what this might mean financially, one estimate from Cowen's Timothy Arcuri pegs the weighted average selling price of the Apple Watches in pre-order at about $449 at launch, trending downward to $422 later on.
If we take this $422 number, and assume that Apple sells about 30 million Apple Watch models in the first year (the average of the implied annual production per Kuo's analysis), then this implies revenue of about $12.66 billion. In context of Apple's revenue base, which analysts expect to come in at just over $226 billion this year, this isn't much.
However, if Apple can grow rapidly from such a base (and we won't know for a while what first-year Apple Watch sales will be), then Apple Watch revenue could one day bring in revenue on the order of what the iPad and the Mac generate annually.
The future may actually be bright for Apple Watch
Frankly, I have been pretty skeptical about the kind of interest the Apple Watch would see in the marketplace. If there really is this kind of demand for the first generation Apple Watch, then it could be a pretty exciting couple of years for Apple Watch.
For example, as third party developers start finding interesting new usages for the Watch, I suspect more people will be interested in buying it. Further, although the first Apple Watch is a nice device in its own right, I think that there are plenty of enhancements that Apple can make across industrial design, internal specifications, and software to make future Apple Watches even more compelling.
I look forward to seeing how the first generation Apple Watch does in the market and to future Apple Watch devices. The success of this product category is hardly guaranteed, but I do think that if any company can make the smartwatch a "must-have" product that generates billions in revenue and profit, it's Apple.
Ashraf Eassa has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. 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.