How many are getting an Apple watch?

[touchstone]

http://bgr.com/2015/04/28/apple-watch-profits-expectations-lower/





It looks like the Apple Watch may not be very profitable, at least at the moment. Tim Cook explains:

Sacconaghi asked Cook if lower margins on the Apple Watch are the result of the device either a) “being burdened by lower volumes and startup costs” or b) if the Apple Watch category as a whole simply carries with it lower margins than initially anticipated.

Not one to get flustered, Cook calmly and simply said that Apple’s gross margins projections only extend out to the current quarter.

“And so as you know, we don’t make long term forecasts on here,” Cook explained. “We make forecasts for the current quarter.”

When the topic was broached yet again, Cook interestingly added that lower margins on the Apple Watch is what Apple expected.

And so what we have right now, which is a situation, it’s not surprising to us, we knew we would be here, is that the watch gross margins for the current quarter that we’ve included in the guidance that Luca’s provided in the aggregate, are lower than the company average. And so that to us is intuitive that they would be. And so I think we must be just looking at it through a different lens than you are.
Keeping the questions coming, Sacconaghi followed up and asked if lower margins on the Apple Watch might be a function of growing pains associated with the launch of any new product.

Cook responded:

In the first quarter with any new kind of product, you would always have learning and these sorts of things. We’ve had this with every product we’ve ever done. And so again, we’re not guiding to what it will be over time. We’re talking about what it is now.
Cook quickly followed up by taking a few shots at the various companies that break down Apple products and attempt to figure out how much each device’s costs to make based on component cost.

And I haven’t even seen this, but generally, there’s cost breakdowns that come out around our products that are much different than the reality. I’ve never seen one that is anywhere close to being accurate. And so if that’s the basis for your comment, I’d really dig on the data if I were you.
All in all, it remains to be seen how much of an impact the Apple Watch has on Apple’s bottom line. For the time being, Apple plans to keep Apple Watch sales figures a secret, lumping them in with accessory sales.

 

[vi edit]

Well, they did put almost $40 million into marketing before it even sold. Then you factor in who knows how much into R&D and initial production run...

Marketing alone cost them $20 a watch (40 million / 2 million preorders). And that could be as high as $40 a watch if it was closer to 1 million after returns and cancelled orders. Then tack on R&D for who knows how much...

Yeah, they are going to need to sell a lot of overpriced $150 bands to start making that up.

 

[touchstone]

Well, they did put almost $40 million into marketing before it even sold. Then you factor in who knows how much into R&D and initial production run...

Marketing alone cost them $20 a watch (40 million / 2 million preorders). And that could be as high as $40 a watch if it was closer to 1 million after returns and cancelled orders. Then tack on R&D for who knows how much...

Yeah, they are going to need to sell a lot of overpriced $150 bands to start making that up.

I hear they sunk over half a billion in R&D. I would not be surprised if it was more than a full billion $. The margins should be insane on those edition watches, really the watch that screws them is the sport for $349. Considering the band itself is $50, they don't have much room to make money on that.

 

[vi edit]

The sport band *retails* for $50. It's a piece of rubber and some machined metal bits. Actual costs are a fraction of that.

 

[poofyhairguy]

Yeah the bands will make them billions. That is the real secret weapon. With this device they basically further vertically integrated and took over the equivalent of the case market in smartphones.

 

[Mopetar]

I hear they sunk over half a billion in R&D. I would not be surprised if it was more than a full billion $. The margins should be insane on those edition watches, really the watch that screws them is the sport for $349. Considering the band itself is $50, they don't have much room to make money on that.

I would imagine that in the process of building the watch they've also gained some valuable insights that can applied to their other products.

Even if you don't end up with a successful product, you can still learn a lot from all of the work you put into it. Supposedly the iPhone was born out of a project to develop a tablet.

 

[Artdeco]

Tim is only talking about the current quarter, unfortunately this is all speculation until Apple decides to release some figures.

 

[Subyman]

I think its way too early to dissect the long term margins, as Cook said. The iPhone enjoyed incredible margins of over 60% even on their launch phones. I don't see why they can't get to those numbers with the watch. As others have said, if the average buyer purchases 2-3 extra bands at 90% profit margin then things start to look amazing.

 

[Commodus]

I think its way too early to dissect the long term margins, as Cook said. The iPhone enjoyed incredible margins of over 60% even on their launch phones. I don't see why they can't get to those numbers with the watch. As others have said, if the average buyer purchases 2-3 extra bands at 90% profit margin then things start to look amazing.

Apple's profit margins on the iPhone aren't over 60%, to my knowledge. Apple's gross margin typically hovers around 35-40%, and since most of its revenue comes from the iPhone... you get the idea. Cook's statement was meant to defuse this very notion that it's charging truly extreme margins.

There's no doubt that it's making a good-sized profit from Watch bands, but how much we don't actually know.

 

[luv2liv]

And the Apple Watch also tells the time, delivers phone notifications, gives you walking directions, plays music, lets you communicate with others and runs thousands of apps that enable everything from ordering Uber cars to controlling your garage door. Not that it's perfect by any stretch, but that's a lot of value for $350.

I'm reminded of the arguments when smartphones hit the mainstream. "Eh, my 5-year-old $80 flip phone is great for making calls and lasts a week on battery, why would you get a phone that won't run for more than a day and will be obsolete in 2-3 years?" It's because the sheer versatility is more than worth the sacrifices you make in longevity. You don't hold off from buying a new computer every few years because you still have your calculator from high school, do you?

i like how you change the subject
i didnt say $350 is expensive for the sheer stuff the watch can do. i didnt say $350 is a ripped off.
i said the watch will be intentionally crippled and be worthless in 2 years. just like how my ipad 1 was working fine with websites. now it can barely load CNN.com fully in 1minute. it used to take under 5 seconds.

 

[nageov3t]

nah... can't stand having anything around my wrist.

my brother-in-law has a smart watch and it's actually pretty good for him since he works in construction and frequently gets work texts and emails while on a job, so it means he doesn't have to whip his phone out of his pocket every 30 seconds.

 

[GusSmed]

Apple has officially declared that you can't make an Apple Watch app that tells time. Because they don't want anyone making watch faces but Apple.

Every once in a while Apple reminds me why I hate Apple. Even though I own a couple of iPads, and wouldn't do without them now.

Incidentally, I'm a LG Watch R owner. Mostly because I wanted a digital watch whose display was truly HD and customizable - most digital watches are stuck with the 7-segment displays that haven't changed since the 80's. The Watch R was the first such watch I felt looked good enough with barely acceptable battery life. Stuff like notifications was secondary, in fact I've got the email notifications turned off because I don't need my wrist vibrating several times a day to tell me about advertising emails.

I would have seriously considered the Apple Watch if the battery life were better and it weren't square, despite my feelings about Apple. Though that might not have worked out since I don't have an iPhone, and don't want one.

 

[touchstone]

Apple has officially declared that you can't make an Apple Watch app that tells time. Because they don't want anyone making watch faces but Apple.

Every once in a while Apple reminds me why I hate Apple. Even though I own a couple of iPads, and wouldn't do without them now.

Incidentally, I'm a LG Watch R owner. Mostly because I wanted a digital watch whose display was truly HD and customizable - most digital watches are stuck with the 7-segment displays that haven't changed since the 80's. The Watch R was the first such watch I felt looked good enough with barely acceptable battery life. Stuff like notifications was secondary, in fact I've got the email notifications turned off because I don't need my wrist vibrating several times a day to tell me about advertising emails.

I would have seriously considered the Apple Watch if the battery life were better and it weren't square, despite my feelings about Apple. Though that might not have worked out since I don't have an iPhone, and don't want one.

It is annoying that you can't get anything more than the stock watch faces. I get why Apple does this, because if every pixel isn't in the right spot it will probably look like crap on such a small screen, but still it is disappointing. I think Apple will open up watch faces once the initial launch is done, maybe in 6 months... for the moment I am stuck with the modular one.


While I agree with your concerns about the watch faces, the battery life has been great in my experience. I'm using the 38mm stainless steel model and usually end the day with 30%+, and charge the watch for two hours and put it back on before I go to sleep. The square face just makes way way more sense, and frankly I think it looks better than round faces, but that's just me.

I suggest you try it out.

 

[Commodus]

Apple has officially declared that you can't make an Apple Watch app that tells time. Because they don't want anyone making watch faces but Apple.

Every once in a while Apple reminds me why I hate Apple. Even though I own a couple of iPads, and wouldn't do without them now.

Incidentally, I'm a LG Watch R owner. Mostly because I wanted a digital watch whose display was truly HD and customizable - most digital watches are stuck with the 7-segment displays that haven't changed since the 80's. The Watch R was the first such watch I felt looked good enough with barely acceptable battery life. Stuff like notifications was secondary, in fact I've got the email notifications turned off because I don't need my wrist vibrating several times a day to tell me about advertising emails.

I would have seriously considered the Apple Watch if the battery life were better and it weren't square, despite my feelings about Apple. Though that might not have worked out since I don't have an iPhone, and don't want one.

You're reading too much into that, I think. We don't know why Apple is barring time-focused Watch apps. It's tempting to trot out the old "because Apple is a tyrant" cliché, but consider a couple of things:

Any time app released right now would suck. It wouldn't actually be what you see when you wake the screen up, and it would have to run partly from your phone even if it did. Want to quickly kill the batteries on both your watch and your iPhone? Tell them to send Bluetooth data every time you flick your wrist. Apple won't even have a truly native (that is, completely on-watch) app kit until later in the year.

Moreover, the software is clearly early. Remember how the original iPhone couldn't do MMS and a few other useful things, but got those later? It's possible that Apple wants to provide a framework for third-party watch faces, and didn't have time to finish it. Don't forget that Android Wear didn't allow third-party faces for months after launch.

This doesn't meant that Apple will let you design your own watch face in the future... just base your opinions on what you know, not what you want to believe.

 

[GusSmed]

While I agree with your concerns about the watch faces, the battery life has been great in my experience. I'm using the 38mm stainless steel model and usually end the day with 30%+

That's not what I consider "great battery life" for a watch. I consider the Watch R's 2 day life to be barely acceptable. This is particularly true if you consider varying load - if it's possible for the watch to run out of power with somewhat heavier-than-normal use before I go to sleep, that's not acceptable.

My personal experience with the Garmin Fenix and the Watch R is that alerts, particularly vibrating alerts, are the big consumers of power, and some days I have a lot more of those.

just base your opinions on what you know, not what you want to believe.

Well, yes. What we know is that Apple won't let 3rd parties design watch faces. I'd like to believe that this is not a permanent policy, that's not what we know.

I agree we don't know their motivations, though given their past history (eBook price fixing, the 30% required royalty that almost pushed Kindle off the platform), I'm not inclined to give them the benefit of the doubt.

 

[WelshBloke]

You're reading too much into that, I think. We don't know why Apple is barring time-focused Watch apps. It's tempting to trot out the old "because Apple is a tyrant" cliché, but consider a couple of things:

Any time app released right now would suck. It wouldn't actually be what you see when you wake the screen up, and it would have to run partly from your phone even if it did. Want to quickly kill the batteries on both your watch and your iPhone? Tell them to send Bluetooth data every time you flick your wrist. Apple won't even have a truly native (that is, completely on-watch) app kit until later in the year.

Moreover, the software is clearly early. Remember how the original iPhone couldn't do MMS and a few other useful things, but got those later? It's possible that Apple wants to provide a framework for third-party watch faces, and didn't have time to finish it. Don't forget that Android Wear didn't allow third-party faces for months after launch.

This doesn't meant that Apple will let you design your own watch face in the future... just base your opinions on what you know, not what you want to believe.

This is pretty much why people say not to buy first generation Apple stuff.

 

[touchstone]

Really the only 'first gen' issue I've run into is the watch faces. It is somewhat understandable that they are exercising tight control over what is essentially the main function of the 'watch'. Also, most of the faces integrate other native apps into the watch face (such as the workout app or weather app) which probably makes it much more complicated to create a good watch face. Apple just doesn't want people making their product look like junk during its initial launch.


The first gen criticisms are really unfounded, this is way more polished than any other first gen apple product released. I also doubt they will be updating the watch hardware anytime soon, you might have to wait till 2017 for the 'second gen'. Personally, 2 years is just too long for me to wait.


The real problem with the Apple watch is its reliance on the iphone. If it worked for android Apple would instantly have a huge market. I really think they will come around once they realize that iOS just isn't for everybody.

 

[Artdeco]

I don't ever see that happening. It would make the ecosystem less sticky.

 

[Applesexual]

I don't ever see that happening. It would make the ecosystem less sticky.

Still nothing on sales. The Watch must be selling terribly.

 

[Commodus]

Well, I got mine (a good 2-3 weeks early, even). Again, it's a 42mm Sport in space gray.

I won't rehash all of the usual impressions, just touch on some standouts.

First: this combo looks and feels pretty good. It's not going to make people think you're wearing a luxury watch, but it's definitely a cut above most smartwatches in fit and finish. Better than the Moto 360? I'm not so sure, but I'll say the size is much better. A 42mm case is noticeably more appropriate for my average-sized wrist than Motorola's 46mm. And the Sport Band... yes, it's a form of rubber, but it's probably the smoothest and nicest rubber you'll put on your arm. Hard to explain without wearing it.

I find myself liking the interface more than I thought I would (like some, I was wondering if it might be too complex). It helps that I've been studying the navigation to no end, but still. I find myself really using the crown, not just experimenting with it. Think of it as a shortcut for those moments when you know you'd otherwise be swiping over and over again.

It's a bit ironic to say this about an Apple mobile device, but the Watch feels like a power user's wearable... and I like that. At least up until Android Wear's next big update arrives, this is what you want if you intend to start tasks from your watch, not simply get notifications. Browsing your Instagram feed from your wrist is a bit weird, but it's really nice to get bus times in Transit or check my Trello projects.

And one last bit: this may not be the most advanced fitness-capable wearable ever, but the way the Activity app is structured suggests that it'll do a good job of motivating me. It's awfully handy to have a shortcut to that app on my watch face, too.

 

[zerogear]

The sport band *retails* for $50. It's a piece of rubber and some machined metal bits. Actual costs are a fraction of that.

What... my Moto 360 leather band retails for $30, and I still buy cheapo ones on Amazon.

 

[Commodus]

What... my Moto 360 leather band retails for $30, and I still buy cheapo ones on Amazon.

Mind you, it's not hard to see why it costs $30. I like it quite a bit, but it's not the softest leather in the world. And it tends to squeak on my wrist!

Apple probably shouldn't be charging $50 for the Sport Band, but I will say that it's probably the cleverest rubber band you'll get. I mentioned that it's comfy and feels good, but that clever tuck-in strap is something I wish we saw more often. You just can't catch your watch on clothes.

 

[openwheel]

Apple watch component =$83.
Now I actually feel bad for those who bought one.
On a side note, Tag Heuer has a smart watch coming out that is actually somewhat interesting. Cheaper than mechanical version too (as it should).

 

[Commodus]

Apple watch component =$83.
Now I actually feel bad for those who bought one.
On a side note, Tag Heuer has a smart watch coming out that is actually somewhat interesting. Cheaper than mechanical version too (as it should).

Did you also catch Tim Cook's statement on how inaccurate these cost breakdowns are?

http://seekingalpha.com/article/310...k-on-q2-2015-results-earnings-call-transcript

You need to register (albeit for free) to see that, so I'll quote the juicy bit:

"And I haven’t even seen this, but generally, there’s cost breakdowns that come out around our products that are much different than the reality. I’ve never seen one that is anywhere close to being accurate. And so if that’s the basis for your comment, I’d really dig on the data if I were you."

There are two big problems with these analyses: they're rough estimates, not accurate reports, and they often exclude many of the other factors that go into getting the product in your hands. Moreover, Cook adds that the profit margins on the Watch are actually lower than the company average. As much as you may want to fantasize that Apple is charging four or five times the cost of the Watch, that's simply not true.

 

[cmdrdredd]

Did you also catch Tim Cook's statement on how inaccurate these cost breakdowns are?



http://seekingalpha.com/article/310...k-on-q2-2015-results-earnings-call-transcript



You need to register (albeit for free) to see that, so I'll quote the juicy bit:



"And I haven’t even seen this, but generally, there’s cost breakdowns that come out around our products that are much different than the reality. I’ve never seen one that is anywhere close to being accurate. And so if that’s the basis for your comment, I’d really dig on the data if I were you."



There are two big problems with these analyses: they're rough estimates, not accurate reports, and they often exclude many of the other factors that go into getting the product in your hands. Moreover, Cook adds that the profit margins on the Watch are actually lower than the company average. As much as you may want to fantasize that Apple is charging four or five times the cost of the Watch, that's simply not true.

Yeah cause you can rely on Tim Cook who has a highly vested interest in selling a ton of watches as an authority on whether the watch is worth it's cost. Forgive me if I laugh in his face will you?

For what Apple is charging I expect more than they offer and sorry if I step on Tim cook's feelings.