The Apple Watch Has Real Value For One Reason
Apple just sold 75 million iPhones in a single quarter. The company's most recent earnings report was so good as to be almost unbelievable. And yet, fans of the company's gadgets don't really care about all that stuff. They want to know about the hardware. This year, for the first time ever, Apple CEO Tim Cook really has them covered.
The Apple Watch is coming, and it might be coming soon. The smartwatch is probably destined to be the model that makes or breaks the entire product category. Google's Android Wear hasn't performed all that well, selling approximately 500,000 units in 2014. The Apple Watch will beat that, and it holds value for investors for one good reason.
Apple Watch Shines Under Beats Halo
The most successful consumer electronics company in recent years hasn't been Apple; it's been the company that Apple bought last year for $2 billion. Beats didn't invest in great technology or exceptional design. The company invested in cool — just what Apple needs to sell a watch.
The iPhone is still glamorous, but everybody's father now uses one for work, taking away the draw of the device as a status symbol. Beats holds that cool, and Apple will be able to leverage it through celebrity endorsements, advertising and simple association between the brands.
Combining the shine the Beats marketing team will put on the Apple Watch with the existing ecosystem boost offered by Apple itself is likely to create a cultural icon on the first try. The hardware doesn't even have to be perfect; it just has to stand out and let people be seen.
Designed For Success
The Apple Watch doesn't need to be the greatest thing on the market when it arrives, and it doesn't even need to be very functional. All it need is to be cool. The first iPhone really didn't have all that much, if any, advantage over the other smartphones of the day, but the all-touchscreen design short-circuited the market and led to mass adoption as the technology matured. Once the App store came along, the device was firmly ingrained in our culture.
The Apple Watch needs to pull off something similar, and it's unlikely that Apple will fail, given the power that Beats gives it in terms of marketing. The first iPhone wasn't designed to really work, it was designed to blow people away and make everyone want to try it. The first Apple Watch won't make your life easier; it'll make your friends jealous.
Creating Value With The Apple Watch
The Apple Watch is only going to work with the iPhone, but that's not going to hurt its prospects. iPhone users are, overall, richer, and they buy more stuff.
Apple sold less than 5 million iPhones in the smartphone's first year on the shelf. That's less than 7 percent of the number it just sold over the Christmas quarter. Apple just needs to convince a small number of iPhone buyers that the watch is worth a buy, especially as a diverting gadget in the middle of an upgrade contract.
Apple's ecosystem, combined with the necessary Beats boost that makes the deal, is strong enough to make the Apple Watch a strong success in its first year on the market and a boon to shareholder value when those earnings numbers roll in.
Disclosure: Author represents that he has no position in any stocks mentioned in this article at the time this article was submitted