Apple Isn’t Worth Much On iWatch Rumors

4/11/14 10:36AM EST

Apple Isnt Worth Much On iWatch Rumors Apple Isnt Worth Much On iWatch Rumors

Designer Todd Hamilton mocks up different possible versions of the iWatch. Via toddham.com

Investors have been waiting. Apple Inc. (NASDAQ:AAPL) hasn’t released a truly new product since 2010, and the company’s financials have been suffering as a result. The rumor mill has been spinning in recent weeks, and its focus has fallen on the company’s supposed wearable, the iWatch. Given recent reports investors should not be all that excited about the product.

Predicting The Impact Of The iWatch

The most recent rumors suggest that the iWatch will be sold as a truly premium product. Ming Chu Kuo, an Apple analyst for KGI securities, released a disruptive report on the device yesterday. According to the piece, which was written up by Apple Insider, the iWatch will cost more than $1000 for some more upmarket models.

A Watch with the same internals and branding may be a hard sell as a luxury product. Exclusivity means value in the luxury market. If Apple Inc. (NASDAQ:AAPL) tries to play both sides it may be squeezed. If it concentrates on the high end, there won’t be enough sales to keep the company growing.

The division of the market is an interesting take on wearables, but high pricing could kill the iWatch. Google is getting into the smartwatch market in  big way, and Samsung has already failed to capture attention with its Galaxy Gear. Just because the tech giants are all making smart watches doesn’t mean they’re what the public wants.

The iWatch is going to be a tough sell. Despite that, Ming Chu Kuo reckons the company will sell 5.5 million units in 2014. That’s an optimistic number, and, judging by recent movements in Apple Inc. (NASDAQ:AAPL), it’s not one that shareholders are really taking seriously. The company’s value has fallen by more than 6 percent since 2014 began.

Apple’s Product Woes

If the iWatch is not the salve that investors hope for, there may be very little Apple can do for them. The iPhone may continue to be the best selling smart phone, but margins are compressing. The tablet market never developed into the business that shareholders would have liked, and new products take a long time to get out of Cupertino’s labs.

Apple may have a product development problem. The company produced three of the most important pieces of hardware of the twenty-first century, but there is no guarantee that kind of success will continue. if the iWatch is a less-than-spectacular seller, Apple Inc. (NASDAQ:AAPL) sales are likely to continue their slump, and a new Apple product may take a long time to arrive.

With other problems on the horizon, Apple Inc. (NASDAQ:AAPL) investors may see the first half of 2014 as a good time to lock in their gains. Apple may produce an iWatch, but it seems unlikely that the product will have the mass market appeal of its top sellers. The Apple Television, or any other product the company may be thinking of releasing, is probably a good way off.

It’s been more than a year and a half since Apple shares peaked. Investors are no longer looking for evidence that the company can return to its glory days. They want to proof that the firm can hold on at the top of the consumer hardware market. The iWatch looks unlikely to cement that position, and, in embryonic form, the device adds little to the value of Apple.

Disclosure: Author represents that he has no position in any stocks mentioned in this article at the time this article was submitted.

 
 

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