Concerns about Apple's iPhone inventory and ability to prolong a two-year upgrade cycle ahead of the iPhone 7 are piling up, but perhaps the worry should be focused on the Apple Watch, a device that is facing more threats by the minute.
If you recall, Apple's take on the Apple Watch was to grow slow, build an ecosystem and ultimately become the next big product cycle for the company. However, Apple's two traditional approaches--premium pricing and once-a-year hardware updates--aren't likely to fly in the long term.
Related: Don't panic about iPhone sales - yet | Samsung, Huawei follow Apple into smartwatch bling | Apple to cut iPhone 6s, iPhone 6s Plus production by 30 percent: Report | What will Apple's next billion-dollar product be?
Apple is going to have to make changes pronto to its approach to the Apple Watch. Here are a few suggestions:
Update Apple Watch quarterly with something new. Bands, apps and software quarterly updates are more feasible with the Apple Watch than say a more mature product like the iPhone. Apple's traditional product cadence doesn't hold up amid the broader wearable field.
Cut the price. The Apple Watch will run you $299 and up. That price is simply too high considering most folks don't know what to do with the Apple Watch and the device is an iPhone companion for the most part. The onslaught of smartwatches at CES has been overwhelming.
Sure, FitBit shares were whacked because it is taking on Apple directly with a smartwatch. But Samsung is also making Gear 2 compatible with iOS. And there are a bevy of specific use devices for fitness for folks that can't see buying a smartwatch. Meanwhile, all dumb watches are going to become smart enough to compete with the so-called notification happy smart ones. Even Casio is in on the Apple Watch killing. The main takeaway here is that no one is scared of Apple anymore.
Decouple the Apple Watch from the iPhone. What does the Apple Watch do by itself that would warrant a purchase. Sure, Apple does fitness tracking, but not better than many in the field. GPS? Nope. Without an iPhone nearby, the Apple Watch doesn't do a lot. Apple needs to change that equation to even think about justifying a decent price.
Fortunately for Apple, this "what do I do with a smartwatch" problem plagues the category. Richard Windsor, an analyst at Edison Investment Research, said it's unlikely that wearables will deliver much of a financial impact on any of the major tech players.
Currently, wearables are good enough to monitor biometric data for recreational and basic fitness uses but nothing more. This makes a wearable nice to have but it still means that there is no burning reason why a user must have one of these devices. This has been echoed in Apple stores, where the Apple Watch tables are the least visited and the most asked question is "why should I buy one?"
In the long term, wearables are likely to be an important part of the ecosystem once everyone has figured out a use case that makes them a must have. Until then they are a solution looking for a problem and likely to remain in the realm of early adopters, techies and the Apple fan base.
What is becoming clear is that the Apple Watch isn't likely to be the next killer product line for the company any time soon. Apple's smartwatch will be a success in its own right, but it's unclear the category will be a broader hit. If that reality plays out, Apple will need to go fishing elsewhere. The iPhone can't pay the bills forever.