March 6, 2013
In an assessment that might surprise some, Bloomberg writes that the still-in-development Apple wristwatch-style device may prove to be more profitable than the company’s rumored television set. The global watch industry is expected to generate more than $60 billion in sales this year. While that’s smaller than the revenue generated in the TV industry, gross margins on watches are about 60 percent, according to analysis.
That’s a gross margin four times larger than for televisions, according to Bloomberg Industries analyst Anand Srinivasan. “Apple, with its iconic brand and lucrative retail network, is poised to tap into the growing watch industry. Headway in the business would help compensate for slowing growth in other areas, such as iPhones and iPods,” writes Bloomberg.
With that slowing growth has come slumping stock, which has fallen by more than one-third since its peak in September. Many see these as “signs of accelerating competition led by Samsung Electronics Co. and concern over how quickly Chief Executive Officer Cook is pushing into new products,” according to the article.
Further statistics show how lucrative a watch device could be. “The TV industry will generate $119 billion in sales this year, according to market-research firm IHS Electronics & Media. Using [Citigroup analyst Oliver] Chen’s margin estimates, a 10 percent share for Apple in each market would mean gross profit of $3.6 billion for watches, outstripping $1.79 billion for TVs,” continues the article.
And the watch could be coming soon. The company reportedly hopes to release it as soon as this year and has filed for 79 patents that include the word “wrist.” This development will further help Apple compete with Google, “…this time, in the area of wearable technology. Google is developing Google Glass, a computing device that resembles spectacles and is worn on the face,” writes Bloomberg.