Fun with Apple's 'other' revenue and the Apple Watch unit guessing game

Apple and CEO Tim Cook aren't telling you how many Apple Watch units sold in the first full quarter of availability, but there are plenty of breadcrumbs for educated guesses.

Apple CEO Tim Cook isn't going to disclose how many Apple Watches sold in the company's fiscal third quarter, but some remedial math coupled with a few hints can yield a few good guesses.

On Apple's earnings conference call, Cook said the company wasn't going to disclose Apple Watch units because he didn't want to give the competition any insight.

Cook did say:

If you look at the other products category, and look at the revenue in this category, it would not be an accurate thing to just look at the sequential change for the year-over-year change and assume that was the total Watch revenue. The aggregate balance of that category sequentially and year-over-year is shrinking . Obviously, iPod is a part of that, but there are other things in there like accessories that are shrinking.

Then Cook noted that Apple Watch sales did exceed expectations even though sales were tight. Apple Watch sell through was also higher than the original iPad and iPhone. Apple did note the iPad sold 3 million units in its first quarter.

Also: iPad sales tumble to four-year low | Larger iPhones bring another Apple quarterly revenue record

The gist here is that Apple is building the ecosystem to make Apple Watch a holiday hit. Sales now matter a smidge, but not too much.

Here's the game Cook is playing. First, Apple isn't giving out numbers because the Apple Watch wouldn't look great relative to the iPhone. And then Cook also doesn't want to tip his hand. In addition, a little mystery results in good press. And finally, by not disclosing figures and dropping hints, there will be plenty of guesses about Apple Watch units.

Let's float a few guesses. For starters, let's look at Apple's "other" revenue, which includes Apple TV, Apple Watch, iPod and Beats.


As you can see from the 56 percent surge in "other" revenue, the Apple Watch had a little mojo on sales.

Now if you assume that Apple sold just as many Apple TV, Beats and iPod units as the previous quarter you get a difference of $952 million. Now assume that Apple's average selling price for an Apple Watch was $500 and you get about 1.9 million units sold.

If the average Apple Watch price was $550 you get about 1.73 million units.

And if you assume sales of Apple TV, Beats and iPod fell about 10 percent sequentially---not a bad guess given recent history but 5 percent more likely---the difference from the third quarter from the second quarter is $1.12 billion. Apply that $500 average selling price and you wind up with 2.24 million Apple Watches sold.

In many camps, 2 million Apple Watches sold would be deemed a flop. Some analysts are expecting about 3 million. However, Apple had supply issues and had a weird rollout where the Apple Watch was online and not in stores.

To get to 3 million units, the average selling price of an Apple Watch would have to be about $350 to $400, or what an Apple Watch Sport runs.

Simply put, Cook isn't giving investors actual Apple Watch units, but certainly has left enough bread crumbs for educated guesses. And if Apple is truly playing for the holiday season with a second release of the Watch OS and native apps, the device is off to a decent start with anywhere from 2 million to 3 million units sold.