24 Million Apple Watches.
Apple (NASDAQ: AAPL ) will sell approximately 24 million Apple Watches in fiscal 2015, according to a prediction from UBS analyst Steve Milunovich (via Apple Insider). The prediction joins a growing number of estimates from analysts as the Street begins to weigh the new device's potential implications on the stock. The estimate tops the consensus analyst estimate for sales of 22.6 million devices in calendar 2015, a period that extends three months beyond Apple's fiscal 2015 and includes the holiday season.
After surveying 1,864 smartphone owners from the U.S., U.K., China, and Italy, Milunovich said one in 10 respondents was "very likely" to buy a smartwatch in the next 12 months. Based on this response, Milunovich believes the same percentage of iPhone owners would be very likely to buy an Apple Watch. This assumption led him to predict 24 million Apple Watch sales in fiscal 2015.
While the extrapolation might seem a bit superficial and maybe even too optimistic, Apple typically boasts higher levels of loyalty than the smartphone market as a whole. So Milunovich's analysis seems like a fairly conservative assumption.
Milunovich's approach to the difficult problem of forecasting sales of an entirely new Apple product line appears similar to that of Morgan Stanley analyst Katy Huberty. Huberty estimates the global installed base of iPhones compatible with the Apple Watch (iPhone 5 or later) at 315 million. She estimates a 10% penetration of this user base would yield about 30 million Apple Watch sales in the first 12 months of the device's availability. The 10% penetration rate would be close to the iPad's first-year penetration rate of 14% (calculated as a percentage of the installed base of iPhones at the time) and the iPhone's first-year penetration rate of 7% (calculated as a percentage of the installed base of iPods at the time).
Huberty believes her estimate for Apple Watch sales is conservative. She predicts the wearable market will ramp up faster than any consumer electronics category yet, including smartphones and tablets.
I've yet to see a more rational approach to pinpointing an estimate on Apple Watch sales. Considering the proven loyalty of Apple's customer base, thinking of potential Apple Watch sales as a percentage of the installed base of compatible iPhones seems like a reasonable method.
What 24 million Apple Watch sales would mean for Apple's business
Milunovich estimates 24 million Apple Watch sales could boost the tech giant's gross profit in fiscal 2015 by $3.4 billion, or about 4.8%. While such an increase might seem small, that's a nice jump for a company that trades at a fairly conservative 18 times earnings.
The Biggest Mystery In Tech
Robert Galbraith / REUTERSTim Cook and the Apple Watch As we head into 2015, there’s only one really big mystery in the technology industry — how will the Apple Watch sell? There’s always going to be other mysteries and surprises, but for the most part, we have a sense of how things are going to work out for the other companies. Google will do Google-y things. Facebook will keep cranking. Twitter will fight to get new users. Amazon will keep losing money. Microsoft will keep evolving to fit Satya Nadella’s vision. And so on, and so on. But, the Apple Watch is a real mystery. Nobody has a strongly convincing opinion on how’s it going to do. Analysts are all over over the map. Gene Munster thinks Apple will sell just 10 million units. Katy Huberty at Morgan Stanley thinks Apple will sell 30 million units. Apple has reportedly ordered 30-40 million units. Part of the reason that people have questions about the Apple Watch is that Apple’s announcement for it was unfocused. After the watch was revealed, Ben Thompson, a normally level-headed analyst, wrote at his site: “We never got an explanation of why the Apple Watch existed, or what need it is supposed to fill. What is the market? Why does Apple believe it can succeed there? What makes the Apple Watch unique?” That seemed to be the big problem. Apple’s on-stage demos didn’t show much of a reason to own the watch. It doesn’t do much that makes it standout versus just owning a smartphone. Plus, Apple contradicted itself
Apple Watch Sport
The Sport collection cases are made from lightweight anodized aluminum in silver and space gray. The display is protected by strengthened Ion-X glass. And the matching fluoroelastomer band comes in five different colors.
For Apple Watch, a new alloy of 7000 Series aluminum that’s 60 percent stronger than standard alloys. Yet it’s very light. Together with the Ion-X glass covering the display, it makes the Sport collection watches up to 30 percent lighter than stainless steel models. It’s also exceptionally pure, with a beautifully consistent appearance that’s difficult to achieve with traditional aluminum alloys.
To keep the Sport collection models as light as possible, we used an aluminosilicate glass that’s especially resistant to scratches and impact. It’s fortified at the molecular level through ion exchange, with smaller ions being replaced by larger ones to create a surface layer far tougher than ordinary glass.
Because it’s made from a custom high-performance fluoroelastomer, the Sport Band is durable and strong, yet surprisingly soft. The smooth, dense material drapes elegantly across your wrist and feels comfortable next to your skin. An innovative pin-and-tuck closure ensures a clean fit. Available in white, blue, green, pink, and black.
Apple Watch isn’t just a different location for your favorite apps. It’s an entirely different way to experience them. A time-saving feature called Glances condenses the most relevant information from each app into a form you can easily scan on the fly. And because Apple Watch can tap you on the wrist, you’ll be aware of notifications instantly.
Gold Apple Watch Will Be Crazy Expensive
The Edition collection features six uniquely elegant expressions of Apple Watch. Each has a watch case crafted from 18-karat gold that our metallurgists have developed to be up to twice as hard as standard gold. The display is protected by polished sapphire crystal. And an exquisitely designed band provides a striking complement.
Got a hankering for the highest-end Apple Watch, the one that comes in 18K gold? Then you better be ready to pay hand over wrist.
So far, Apple’s only officially said that the Apple Watch’s start at $350. But that’s likely the price point for the entry-level model, the Apple Watch Sport. How much will the super-fancy 18K gold Apple Watch Edition cost? We don’t know for sure yet, but a French Apple blog is claiming this week they’ll run somewhere between $4,000 and $5,000. That’s after similar rumors put it at a much more palatable if still a wee bit crazy $1,200.
“$5,000?! For a smartwatch? That’s nuts!,” a reasonable person might exclaim at this point. But $5,000 is actually a steal for an 18k gold watch. A quick perusal of Google Shopping reveals that full-18K luxury watches (not the merely gold-plated timepieces) tend to run upwards of $10,000, and can be as much as $30,000, though many of these watches use more gold than the Apple Watch will. That aside, 18K gold is expensive, and despite all its magic, Apple can’t simply will the material’s price to go down—as of this writing, one ounce of 18K gold is worth roughly $858.
Ultimately, we won’t know what the high-end Apple Watch will cost until Apple tells us. That said, that the $5,000 rumor is even remotely believable reveals who Apple is really targeting with the 18K gold Apple Watch Edition: The kinds of people who would spend on a watch roughly what I spent on my college degree. (Thanks, state school!) For the upper crust, $5,000 is a paltry sum compared to what they’re used to spending on timepieces.
Where the Apple Watch could get into trouble with these buyers, however, its in the value retention department. If I were to win the lottery tonight and go off and buy a $20,000 gold Rolex, I could probably sell the thing for at least what I paid for it 15 years from now to, I don’t know, finance a house. The Apple Watch, however, is more of a consumer tech product, likely to be subject to the same depreciations in value as aging iPhones and iPads.
Who would pay $5,000 for a gizmo that’s going to be obsolete in a year or two? That’s a question Apple needs to answer if it wants to actually sell any of the high-end Apple Watches. One idea: Perhaps it could sell them on some kind of subscription model, where consumers pay a certain amount over time to get subsidized upgrades when new models are out, similar to the model with which some wireless carriers are now experimenting.
If the gold Apple Watch Edition indeed retails for $5,000, it’ll be far from the most expensive device Apple sells. A fully-tricked out iMac With Retina 5K Display, packed with Apple’s creative editing software, costs $5,147.97. But hey, free shipping!
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