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Apple Watch running out of steam, claim analysts

Steve Rogerson
July 29, 2015
 
The Apple Watch is running out of steam despite it being the most successful smart watch launch so far, believe analysts at Juniper Research.
 
Despite sales not being revealed in Apple’s quarterly earnings call – they were mixed in with the other products category – the analysts have read between the lines and estimated that the company sold between 2 and 2.5 million watches in the second quarter of this year, bringing in about $1bn in revenue. This means more than six million sales are expected by the end of the year.
 
“While we didn't expect Tim Cook to bare all with the Apple Watch sales, there were some indications in the quarterly earnings call that shed some light on the wearable's performance,” said a Juniper statement.
 
Cook said: “'It would not be an inaccurate thing to look at the sequential revenue, the year-over-year change and assume that was the total watch revenue.” Apple CFO Luca Maestri clarified this by stating that “the contribution from Apple Watch accounted for well over 100 per cent of the growth of the category”, thanks to declining sales of the iPod and accessories.
 
“Quite apart from being bad news from those betting on a success for Beats headphones, these comments give an indication of overall sales,” said the statement. “Depending on the average selling price of Apple Watch the year-on-year revenue increase indicates between 1.5 and 2.5 million units. Apple CFO Luca Maestri also remarked that the watch has sold more than the first iPhone or the iPad in a comparable period – that is 87 days. The first iPad was the better selling of these two, and sold two million in 60 days. Given the above, we can assume there have been more than two million watch sales so far.”
 
How much higher depends on how much other products revenue shifted from other accessories to the watch. The segment had been on a year-on-year decline of approximately $200m until the Apple Watch launch.
 
Assuming a similar decrease this quarter, watch revenue was approximately $1bn. This figure only results in more than 2.5 million units if the Apple Watch Sport has a 75 per cent or greater share of the product line's revenue. With reports that the $10,000+ Apple Watch Edition has sold out in China, this is unlikely to be the case.
 
Based on the above breakdown, Juniper devices analyst James Moar said: "These figures mean that Apple Watch sales to date are most likely between 2 and 2.5 million. This makes it the most successful smartwatch launch to date, with no other launches coming close in a comparable time period. However, despite buyers being satisfied with the device, we continue to see that the product is running out of steam. We would also expect a decline in sales following launch, especially as the first half draws to a close. This means we are unlikely to see more than seven million Apple Watches sold by the end of 2015, even with a boost to sales over the Christmas period."
 
A separate report by Strategy Analytics estimates that Apple sold four million watches in the quarter.It says that global smart watch shipments grew 457 per cent annually to hit a record five million units in the second quarter of 2015. Apple Watch was the star performer, capturing a dominant 75 per cent market share.
 
Global smart watch shipments grew 457 per cent annually from one million units in Q2 2014 to hit a record 5.3 million in Q2 2015. It was the smart watch industry's fastest ever growth rate. Volumes in the second quarter of 2015 were higher than for the whole of last year, when 4.6 million smart watches shipped globally in 2014.”


“We estimate Apple Watch shipped 4.0 million units and captured a dominant 75 per cent smart watch market share worldwide in Q2 2015,” said Neil Mawston, executive director at Strategy Analytics. “Apple Watch launched in 16 major countries and saw decent take-up from iPhone loyalists in the USA and elsewhere. Apple Watch has clearly raised the bar for the global smart watch industry. The ball is now in the court of rivals, like Samsung, to respond.”
 
Rajeev Nair, senior analyst at Strategy Analytics, added: “We estimate Samsung shipped 0.4 million smart watches and captured eight per cent marketshare worldwide for second position. Apple and Samsung together account for eight in ten of all smart watches shipped globally. However, Samsung is a long way behind Apple and it will need to launch multiple new smart watch models and apps across dozens of countries if it wants to reduce Apple’s global smart watch leadership in the coming months.”
 
An even higher estimate came from Canalys, which reckoned Apple sold 4.2 million in the quarter.
 
“The Apple Watch is the most sophisticated smart watch to date, and it has proved popular with Apple fans worldwide,” said Chris Jones, VP and principal analyst at Canalys. “But Apple and other vendors still face important challenges to make the smart watch a breakout hit. Improvements in performance, battery life and sensor integration are needed to make future models more attractive, but it is the quality of third-party apps that will determine whether the Apple Watch will be a long-term success.”