'iWatch' could 'be a $6 billion opportunity for Apple,' says analyst

'iWatch' could 'be a $6 billion opportunity for Apple,' says analyst

Summary: Why should Apple scrabble in the cut-throat TV market when the wristwatch market is far more lucrative? One analyst crunched the numbers and found that an 'iWatch' could pull in twice as much profit for Apple than a TV could.


There's been a lot of chatter that Apple, renowned for revolutionizing portable music players, smartphones, and tablets, is getting ready to change wristwatches forever. And one analyst thinks that it could be worth billions to Apple.

Yes, that's billions. With a "b".

(Image: Nickolay Lamm/MyVoucherCodes)

Citigroup analyst Oliver Chen has been crunching the numbers, and he's pulled together some figures.

See also: 'iWatch': Here's what it might look like

Speaking to Bloomberg, Chen said he believes that the iWatch could "be a $6 billion opportunity for Apple", and that there is "plenty of opportunity for upside if they create something totally new like they did with the iPod".

According to Chen, the global watch market is worth some $60 billion a year, and his "$6 billion opportunity" depends on Apple capturing 10 percent of the market.

But the margins on watches are huge, along the lines of 60 percent. Chen's back-of-the-envelope calculations point to the iWatch generating a gross profit of $3.6 billion for Apple.

The iWatch, according to Chen, would be worth more to Apple than capturing 10 percent of the TV market, which would only net Apple a gross profit of $1.79 billion.

Topic: Apple

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  • nice make-work article

    Next article, the iShoe
  • So...

    ...Apple's upscale customer base is going to replace Rolexes, Breitlings, Tag-Heuers, Piagets, etc for a plastic watch? This might work well for 20 somethings who have never worn a watch (not because they couldn't afford it but because the told time with their cell phone) and who dress in graphic tee's for work.

    This must work a jewelry and as a status symbol for most people who are already invested in the appels eco system and wear watches.
    • yes..

      txscott nailed the problem on the head. Look at all the markets in which Apple succeeded in the past: tablets, phones, music player, computers. None are luxury-oriented markets. Yes, margins are huge, but are they huge for the Timex watches you can get at Wal-Mart? That's more the type of watch wearer Apple seems likely to displace, but who knows. I've been dead wrong about Apple before.
    • yes... BUT...

      I usually don't involve myself with commentary but there is something here that you're missing.

      Firstly I agree with you! I spent a bit of coin on a watch and I'm not at all likely to replace it with an iWatch. However there are so many things that I could and would do with an iWatch that I'll buy one anyway. If it gives me quick and easy access to the utility delivered by my phone then I'll attach it to the steering wheel in my car so I can quickly access Siri or provide easier access to caller ID. I'll buy one to wear on the beach -- where wearing an expensive Omega or Rolex is not only ridiculous but a loss risk. I'll CARRY one to meetings where I know that picking up my phone would be horribly tactless and a watch interface would be less obtrusive.

      Heck for much easier access to Siri alone I'm inclined to buy one for my teenagers for verbal access to the phone interface in a car. That alone will hopefully keep their eyes on the road and not on fishing around for the phone (which they shouldn't do but undoubtedly desire to do).

      The Watch metaphor is simple and direct but the use cases are far beyond wearing on your wrist. In college I hated wearing a watch but I bought a G-Shock and strapped it to my backpack.

      Just saying.
      • Yep... Things like put it on a charger every night !

        Gimme a break. A watch runs for years; mines comes off when I shower. Given their (still) appalling record of battery life on the iphone I doubt this is worthwhile. There's enough devotees to try the emperors new clothes again though!
    • this

      txscott nailed it. Those brands are timeless, classical devices. I am a pretty successful business owner, and one of objectives is to wear a Breitling or a Movado one day as an every-day watch.
      I could care less if Apple or Android (even though I'm an Android man) came out with a watch. I simply just dont care. The only way it will serve me well is if I wear it to work, but I already have a Galaxy Note 2 to do everything this watch will probably do. The other caveat is that like the iPod, they will get old (fast) and a new generation of watches will come in, rendering the last generation as "old". Kind of useless, dont you think?
      That being said, I am interested in seeing what both major competitors can come out with. It should find a class of people as txscott mentioned, but I believe it can be teachers, trainers, doctors and anything in the line of business. If it looks like a 20-something watch, I wont blink. It needs to be utilitarian.
      Chris Marzarella
      • These are and have been out for some time

        Sony and the company making the Pebble have been making these watches for a while. You should check them out..... Apple is the last to the party with the iWatch. Samsung demo it what was it 2 years ago at CES
  • This will flop

    it will make 0 billion
    • Flop?

      So a product that hasn't been released, with features you have zero clue about but you have personally decided will be just like everybody else's ?...will be a flop?
      It must be terrible to be so well informed.
      • Just like the citigroup "analyst" predicting...

        Apple making 3.5 billion in profit. The analyst has zero clue too.
  • Really?

    It would be interesting to see if they can capture 10% of the market. However, I find that number a little higher. Ignoring the fact that people, like me, don't wear a watch; I find it difficult to believe that people would spend the extra money on an iWatch when they don't really need that functionality and can stick with their traditional watches and/or cell phones.
    • You'd be surprised

      You all would be surprised what people out there will buy. It is really shocking the way the US and the entire world has dummbed down. A lot of people will buy this even though it really isn't that great of an idea or even practical nowadays. I don't think its a $6 billion dollar opportunity, but it will get into the billions simply because there are quite a lot of people out there who are quite frankly not that bright. Sorry to say, but that's reality. And since it will come from Apple, by default you will have thousands buying this initially. Again, it is based mostly on reputation of the Company involved and the gullability of the buying public. Very sad.
      • Agreed

        Agrees that Apple still commands a shocking number of blind purchasers - if it's Apple, I gotta have it if for no other reason than to be hip and cool.

        On the other hand, there's a confluence of factors that may undermine their success in this:

        -Their image has been taking a major hit, both in terms of their asinine legal battles and the clear deceleration of their "innovation" ability (if they ever had much in reality).

        -They now face more direct competition than they have at any time in the past - Android is every bit an equal (if not outright superior) to iOS.

        -OEMs are on par when it comes to design, and Samsung's advertising has successfully painted Apple as the has-been.

        -Apple won't be first to market with a Smart Watch, so they'll have less legal leverage and they'll outright appear as the me-too.

        And lastly,

        -In the face of Google's Glass, an iWatch seems rather pathetic. Regardless of how successful/practical Google Glass is, it's far and away more innovative than a smart watch, which will essentially just be a shrunk down iPhone.

        So now Apple will have taken the original iPod and made: A version that can make phone calls (iPhone). An enlarged version (iPad). An not quite so enlarged version (iPad Mini). And now a shrunk down version (iWatch). It seems to have become clear they're really a one-trick-pony, just taking the same basic device and making it in different sizes and shapes.

        That's all well and good, and they've been successful and have made a lot of money at it. But it's not exactly innovative, and the longer they stick to the same game, the less they'll be able to sell themselves as an ultra-creative and innovative company. And as their appeal is so heavily based on that image, it could spell real trouble.
        • Not to mention....

          The iPhone was one of the smartphones that really made the big impact begin on young people not wearing watches due to the time being on their smartphone. It would now be just a little more than ironic for Apple to now tell the pubic there is a reason to go back to wearing a watch.

          In reality, unless the iWatch really provides something really new and innovative that would bring some kind of improved quality of life to society, there is only one realistic reason why an iWatch would be very successful. As already mentioned, its the "i" factor; as in "its made by Apple so I should buy it" factor.

          On the one hand while its shameful, and shameful for so many in society that would likely have this reaction to an iWatch that sounds like its not really going to be up to a whole lot more than linking to your iPhone, its hard to blame Apple for producing another gadget if their bean counters predict it will sell.

          The problem is, this iWatch thing, as its described around here seems to be not much more than an iPhone accessory. And for what it is it likely wouldnt be cheap. Not when Apple makes and sells it. When one looks at Apple gadgets they have a rather curious marketing history to them.

          When the iPod became famous, people already knew what portable mp3 players were. The iPod wasnt cheap but it could provide for enourmous storage capacities and a great intuitive interface. Both great selling points. When one combined that with Apples typical styling appeal it wasnt hard to see why the iPod sold well even with a high price.

          When the iPhone came out, it was a ground breaking peice of hardware. So much so that any company (read in Microsoft and RIM here) that didnt realize instantly what the touch interface did for smartphones, almost instantly ran into trouble. Again, the iPhone wasnt cheap, but what it did was very potent. The problem with smartphones of old had always been you were working with a limited number of buttons and controls, some fairly clunky, touch interface eliminated all that with never ending screens of new "touch screen" buttons and controls all custom created, appearing as needed and disapearing for new ones to come up as needed with each new application or usage.

          The iPad is a bit of a mystery in some respects. It is a gadget that created its own market. If one looks at what they are getting for their money in an iPad, it appears the actual device is rather underpowered, without USB support, no media drive, very limited storage and only capable of running lightweight applications. And again, it wasnt cheap. Its major feature is portable computing, but that was a feature netbooks were already busy trying to tap into. There seems to be no doubt that the Apple mistique of "innovation" along with ads that made the iPad look like the next big and "magical" thing played a huge role in making the iPad as successful as it has been.

          But the iWatch? I would think it has to be a tougher sell. its just that it appears to be something too many people can get along without. You need your phone if your going to make phonecalls throughout the day. From that respect, its hard to forget your phone in the morning, it makes you think of it before you walk out the door because you just know you will need to be contacting people with it. In the "old days" you would remember your watch because you knew you would want to be able to tell the time, so your watch, much like your phone would be one of those things that you would need.

          But the iWatch? Do you actually need it? If you walked out the door without it would you be cursing yourself all day for forgetting it? I dont think so. Therein is a telling fact about something like an iWatch. Particularly if it does cost a lot.

          One more thing to have to try and remember when rushing out the door in the morning. Hopefully not.
    • Deja vue...

      That was exactly what they said about the iPod, the iPhone and the iPad...and look how that went. Every Tom Dick and Harry lol'd endlessly with the same argument and here you are thinking that it's main function will be to tell the time... I mean...what?
      • Apple iFans will buy them, but no one else

        Those are the same people that buy every other Apple product. Just do a quick check with anyone you know who has an iPhone and I'll bet they'll have at least 2 other Apple products.

        The cult of Mac.
        • Re: Apple iFans will buy them, but no one else

          Not true laequis! At least not for everyone. I did not own anything Apple until my wife bought me an Ipad back in 2010.

          I did upgrade to a 4th gen ipad, but other than the two ipads, I still don't have any other Apple products....

        • So what?

          I have had 3 Ducati bikes and 4 Moto Guzzi's...does that make me a force-fed pasta addicted cultist in thrall to Italian engineering? No. I buy them because I like the experience, enjoy using them and get what I consider a fair return on my investment.
          Do you buy a different brand of candy bar every time you want a sugar rush? Do you buy a different beer brand in a different bar with a different group of mates when you go out in fear of becoming a drone cultist? Of course not.
          If you're going to mindlessly repeat a meme, at least choose one with a shred of logic in tow.
  • All the accuracy of a Gartner forecast

    Yeh they may make some money but $6bn, please.

    One more thing, unless the watch face is the size of Big Ben your not going to see much on a 1 inch screen unless you have eyes with built in microfiche readers.
    Alan Smithie
    • Apple and Google teams up!

      Obviously, this works in conjunction with the Google Glass. Use the Google glasses to magnify your vision so you can read off Apple one-inch watch screen.