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    No Wonder Apple Wants to Get into the Smartwatch Business

    Written by

    Adam Clark Estes

    You can't dip one toe in the tech blog waters without getting bitten by an iWatch rumor these days. Apple is working on a smartwatch—even fancy newspapers like The New York Times and The Wall Street Journal say so—and Apple bloggers are busy exploring every possible feature set that such a device could boast. Design firms are churning out all sorts of mockups for what the thing might look like, everything from a sleeker-looking iPod Nano to what looks like an electronic KitKat bar. But why?

    In a weird way, the iWatch feels like Apple's chance at salvation. Just a couple of months ago, all the industry pundits were crowing about how Apple has lost its spark in the post-Steve Jobs era. Now, the sheer volume of rumors and bright ideas is so overwhelming, it feels like 2006 all over again, when nerds were going nuts dreaming about an Apple smartphone. The iPhone is now Apple's engine room, the place that powers much of its business growth, but recent reports that iPhone demand is dropping has left Apple's stock sputtering. Well, consider this iWatch mania the spark plug that could get the company running on all cylinders again. 

    It makes a lot of sense for Apple to release a smartwatch. And although Apple is one of the wealthiest — or the wealthiest, depending on the day — companies in the world, they're going to need to keep making money if they want to maintain that status. Almost surprisingly, the watch industry is rather lucrative. (It's only surprising if you forget that companies like Rolex sell their time-telling bangles for tens of thousands of dollars.) A 2011 study of the world's biggest timepiece makers reveals the watch industry alone is worth over $46 billion. That number climbs north of $50 billion when you include clocks. The "fitness watch market" which would include GPS-enabled smartwatches is expected to top $1 billion this year, 50 percent more than it was last year. And that's with just a handful of players in the game, most of whom are small startups with limited resources.

    Those big numbers seem less impressive when you consider that Apple has about $137 billion in cash on hand, enough to buy Timex several times over. Like any good profit-loving company, though, Apple surely wants to watch this number continue to grow, and in recent years, it's had tremendous success at attacking nascent or non-existent markets with a jaw-droppingly innovative new product.

    Consider the cell phone industry in 2007, when Apple released the iPhone. Although there were a few smartphones on the market, they were terrible, and pretty much only ever seen attached to the belts of business executives. In 2007, the entire cell phone industry saw just over $40 million in revenue. By the end of 2014, analysts estimate that the smartphones alone will generate over $150 billion in revenue. In other words, companies like Apple have basically been minting money these past few years. And that's not even counting the billions of dollars in revenue being made from apps, a category that basically didn't exist before the iPhone.

    Those days are over. As the Financial Times declared last month, "the smartphone industry’s go-go years are officially over," as competition heats up the increasingly crowded marketplace. This is why you've been seeing rumors about a cheap iPhone floating around. Basically, the only markets that aren't saturated with smartphones are developing countries and China whose population seems to prefer buying iPhone knockoffs than the real thing.

    As iWatch rumors gained steam last week, Apple CEO Tim Cook put the brakes on the cheap iPhone speculation. Speaking at a Goldman-Sachs technology conference, Cook stressed Apple's continued commitment to innovation and danced around the idea of a cheaper iPhone by telling a little story about the company's decision to make a more affordable iPod. "Instead of saying, 'How can we cheapen this iPod to get [the price] lower,' we asked, 'How can we do a great product?'" he said. Instead, the team built a product that could "excel at a very low price, and appeal to a lot more people."

    What's Tim saying here? And how exactly does one "do a great product?" Well, without putting words in the Apple veteran's mouth, I'd suggest that Tim Cook is basically saying that Apple's most interested in building great products that a lot of people will buy. That's a simplistic read, I realize, but Cook's statement also backs up the idea of an iWatch in the works. It seems like just yesterday everybody was freaking out over rumors that Apple was building a smart television set.

    But guess what: Most people that want to buy a TV, already own a TV, and if there's any electronics sector that's more crowded than the smartphone sector, it's the TV sector. That's not to say that Apple wouldn't mind joining in the fun. Completely reinventing another industry, like the watch industry. It's actually more accurate to say that Apple will pioneer a new industry, the smartwatch industry.

    All that said, I really do want to drive the point home that none of knows what Apple's going to do next. What we do know is that the smartwatch industry is brand new, growing at a breakneck pace and potentially game-changing for the burgeoning field of wearable computing — not to mention new ways that a device can rule your life.

    We also know that Apple's losing steam and needs something to fuel its innovative fires. Maybe it'll be a cheap iPhone, and maybe it'll be a smart television set. It makes great sense that Apple's next move will be an iWatch, though. And I'm not just saying that because I want one to replace my broken Casio, either.

    Image via Fuse Chicken

    Topics: apple, iWatch, gadgets, Tim Cook

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