iWatches may prove better bet than televisions for Apple

PUBLISHED : Wednesday, 06 March, 2013, 12:00am
UPDATED : Wednesday, 06 March, 2013, 5:05am

While Apple chief executive Tim Cook has dropped hints that the company is hard at work on a television to drive the next era of growth, the company's wristwatch-style device, still in development, may prove more profitable.

The global watch industry would generate more than US$60 billion in sales this year, said Citigroup analyst Oliver Chen. While that is smaller than the revenue that comes from televisions, gross margins on watches were about 60 per cent, he said. That is four times bigger than for televisions, according to another analyst.

Apple, with its iconic brand and lucrative retail network, is poised to tap into the growing watch industry. Headway in the business would help compensate for slowing growth in other areas, such as iPhones and iPods.

The company's stock has slumped by more than a third since peaking in September on signs of accelerating competition led by Samsung Electronics and concern over how quickly Cook is pushing into new products.

"This can be a US$6 billion opportunity for Apple, with plenty of opportunity for upside if they create something totally new like they did with the iPod - something consumers didn't even know they needed," said Chen.

The television industry will generate US$119 billion in sales this year, according to market research firm IHS Electronics & Media. Using Chen's margin estimates, a 10 per cent share for Apple in each market would mean gross profit of US$3.6 billion for watches, outstripping US$1.79 billion for televisions.

Apple had a design team of about 100 working on a wristwatch-like device that might perform some of the tasks now handled by the iPhone and iPad, people familiar with the company's plans said last month.

Features under consideration included letting users make calls, see the identity of incoming callers and check map co-ordinates, said one of the people, who asked not to be identified because the plans are not public.

Apple planned to introduce the device as soon as this year, this person said. Apple has filed at least 79 patent applications that include the word "wrist", including one for a device with a flexible screen, powered by kinetic energy.

To accommodate the smaller screen of a watch, Apple could adapt its iOS mobile software to limit what information was sent to a wrist device, said Scott Wilson, a designer who developed a line of watchbands that used the iPod nano as a watch.

"The wrist is a valuable piece of convenient, glanceable real estate for viewing information," Wilson said. "It'd be great to see information like, 'Where are we meeting for lunch?'"