Are We Underestimating Apple Watch?

Days after Apple showed off their latest technological breakthrough during the big Apple Watch reveal, many observers remain unimpressed. A shrug there and a nod here are the more visible and subtle reactions.

From Wall Street analysts to tech journalists to bloggers who follow Apple, very few were smitten with any gadget with the word “watch” attached to it. The raves were reserved for Apple’s super-thin new Macbook laptop computer.

"The question will be whether [the watch] offers enough utility and is enough of a time saver to warrant plugging in yet another device every night," Brian Blair, an analyst for Rosenblatt Securities who attended the event, noted in one typical comment. "We are skeptical."

But without resorting to one of those endless laundry lists of wrong-way predictions about earlier Apple products, Aaron Pressman of Yahoo! Finance offers four reasons why the conventional wisdom may have it wrong about the Apple Watch.

1. They Don’t Get Fashion
   
   As CEO Tim Cook noted when he (finally) got to the Apple Watch details in Monday’s presentation, the device is by far the most personal gadget the company has ever made because it’s something worn on your person and outwardly for all to see. In addition to whatever functionality it provides, the watch is also a statement about personal style, fashion and appearance.
   
   That’s not exactly the bailiwick of Wall Street analysts and technology bloggers. But it has been clear for a while that top tech companies, led by Apple and Google, were aware of the coming importance of fashion and actively sought to recruit the talent necessary to compete on that playing field. Apple over the past two years hired former Burberry CEO Angela Ahrendts, Paul Deneve from Yves Saint Laurent and designer Marc Newson, among others.
   
   And despite the loud criticism from tech heads, plenty of fashionistas are raving. As watch aficionado Benjamin Clymer wrote after first seeing the Apple device last fall: “There is nothing that comes close to the fluidity, attention to detail, or simple build quality” among traditional watches or smartwatches at the US$ 350 price point. Comments after Monday’s presentation were equally effusive.
   
   It’s just too bad that Ahrendts didn’t get to take the stage on Monday. Apple hasn’t ever had a female executive from the company present and only two of 59 featured speakers since 2007 were woman, as Yahoo Tech’s Alyssa Bereznak reported.
2. They Don’t Appreciate the Size of the Potential Market
   
   Apple has grown so large — sales in 2014 totaled almost US$ 200 billion — that the potential size of the watch-buying market has been missed. Only a relatively small fraction of iPhone buyers could create a sizable hit in the wearables market, which has thus far barely gotten off the ground.
   
   Over 300 million people own an iPhone 5 or later model, which will be compatible with the new watch. If only 5 percent of those iPhone owners buy a watch this year, Apple will have sold 20 times as many watches as its Android Wear competitors did last year. And 5 percent penetration may be conservative.
   
   When the iPad arrived, 14 percent of iPhone owners bought one in the first year, while 7 percent of iPod owners bought an iPhone in its first year on the market, according to research by Morgan Stanley analyst Katy Huberty. And consumer surveys after last year's initial unveiling found anywhere from 10 percent to 20 percent of iPhone owners interested in buying the Apple Watch.
3. Too Focused on Limitations of Version 1.0
   
   The first Apple watches are, like many first-generation Apple products, filled with compromises. The battery lasts only one day, connectivity to the wider world requires an iPhone and the design is maybe a little thicker than some would like. The first iPad lacked a keyboard and had a low-resolution screen. The first iPhone didn’t even even have 3G broadband mobile speeds for web browsing.
   
   But Apple’s vision extends beyond the initial product and the company relentlessly improves its offerings year after year. As the first-generation Apple Watch attracts buyers and developers, the company is no doubt already working on better models to come. Perhaps only 10 million to 20 million will buy a watch this year, but they’ll provide a base for more popular models, models that may be able to make their own mobile connections and eventually replace much of the role of smartphones.
4. It Wasn’t the World’s Best Presentation
   
   It’s no doubt annoying for Tim Cook to be compared to his predecessor at every turn, but it was apparent during Monday’s event that Apple is missing one core strength it had during the Jobs era. There is no one who can deliver the kind of magnetic and convincing marketing pitch Jobs was rightly famous for.
   
   Go back and watch Steve Jobs introducing the iPhone, for example. In a compelling and dramatic speech, Jobs uses all the tricks of great speakers. He starts by promising the crowd three new products, a touchscreen iPod, an improved mobile phone and a revolutionary Internet communicator. And the big reveal? The iPhone is all three. And his excitement is palpable as he goes through the rest of the demo.
   
   Cook borrowed some of the structure of the iPhone introduction for his watch pitch. Instead of an iPod, a phone and an Internet communicator, Cook went with “the most advanced timepiece ever created," a "revolutionary" way to connect with others and a new fitness companion. But where Jobs came off as passionate, unscripted and compelling, Cook sounded restrained, rehearsed and lackluster.
   
   Vice President of Technology Kevin Lynch also had a key role in the watch presentation, showing off a handful of impressive apps, but the level of his energy and enthusiasm also left much to be desired.
   
   And that may be the greatest risk to the Apple Watch. The company will have a difficult task of investing in improvements for future generations if buyers don’t give the watch a first chance. Still, given the size of the audience and its history of loyalty to Apple products, that’s probably not a great risk.