The Impact Of The Apple Watch on Investors

This April, the Apple Watch will hit stores.  The impact of the newest product from the world’s most valuable company is expected to make waves in the watch industry.  But what will the impact be for investors?

When Steve Jobs returned to Apple nearly 20 years ago, he immediately slashed their product offering to four items.  That level of focus saved the failing company.  But now, with profits at an all time high and nearly $70 Billion in cash, Apple is again expanding its product offering.  Is this the start of another vicious cycle?

The Apple of old made products that tended to be independent of one another.  The Apple of today makes products that depend on one another.  The original iPod (the real savior of Apple) needed a Mac to operate at its best.  Apple pulled funding from Mac marketing and gave it all to iPod marketing.  Mac sales increased.  My question as an investor is, how does the Apple Watch integrate?

The obvious answer is that all the information needed to make the Apple Watch cool, is actually being fed from your iPhone.  This is an important link in the Apple chain of product dependency.  Your Apple Watch is dependent on your iPhone, which is dependent on iTunes and the App Store.  You get the picture.  But as an investor, is the Apple Watch a valuable addition to the Apple lineup?

I tweeted a link to an article yesterday detailing that Apple had between five and six million watches on order for the initial release.  At least half are the Sport version which retails at $349.  Apple likes to sell out of items because the limited supply makes them even more desirable.  That said, six million watches at $349 represents $2.1 billion in revenue in QE2.

A Barron’s report yesterday pinned the Apple Watch’s revenue for next year at $23 billion.  That’s a 10% boost to current expected revenues.  That figure would be the result of 55 million watches being sold.

What interests me to see is how many additional iPhones the company can sell because of the Apple Watch.  This trickle down effect could really move revenues upward.  I’ll also be watching to see what negative impact the Apple Watch will have on the share price of Swatch Group and Richemont.

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