Sources are getting chatty again, telling The Wall Street Journal and The New York Times over the weekend that Apple Inc. (NASDAQ:AAPL) is working on a high-tech watch.
This isn’t the first time that we’re hearing about a smart watch out of the class act of Cupertino. The iWatch buzz has been bubbling for months. This doesn’t mean that we’re getting one. Apple’s name has been tied to high-def TVs, phablets, and cars in recent months. Even if Apple Inc. (NASDAQ:AAPL) is actually testing watch designs, it doesn’t mean that a device will actually see the light of day.
1. Watches are a hard sell for tech-savvy consumers
Stroll through the halls of a high school or a college campus and you just don’t see wristwatches these days. Who needs a one-dimensional watch when smartphones or even fitness bands can tell the time?
This doesn’t mean that watches are dinosaurs. They remain popular as fashion statements for adults. The Swiss watch industry posted record exports last year, and fashion-forward players are doing well closer to home. Fossil, Inc. (NASDAQ:FOSL) may have been downgraded by a Benchmark analyst this morning, but the Texas-based maker of stylish timepieces is still expected to grow its sales by 11% this year after a similar spurt through 2012.
However, it still makes this a difficult market to crack when potential buyers will wondering if they really even need a watch these days.
2. Apple may not be the ideal disruptor
A sleepy watch market isn’t enough to shoot down Apple Inc. (NASDAQ:AAPL)’s chances, bulls will rightfully argue. Apple rolled out the iPod in 2001 when the Walkman craze had come and gone. The iPhone in 2007 transformed smartphones that were largely popular at the corporate level into a consumer craze.
Apple didn’t have a lot of competition as it forged new ground, but that won’t be the case with Web-savvy watches.
Pebble raised more than $10 million on Kickstarter last year for its customizable watch that uses Bluetooth to alert Android and iPhone owners about incoming calls, emails, and text messages.
On a larger scale, why will Apple Inc. (NASDAQ:AAPL) fare any better than Google Inc (NASDAQ:GOOG)?
As Apple-watching blogs chat about the tech giant possibly introducing a smart watch or even a car, Google already has wearable computing products and self-driving cars out in the wild. Sure, Google has no plans of selling its Web-tethered goggles or its street mapping automobiles, but it’s already extending its brand by showing the public that Big G makes these things possible.
The moment that Apple Inc. (NASDAQ:AAPL) breaks out its wrist hugger there will probably be smarter competition than it has faced in earlier introductions.
3. We can’t forget fitness
Apple CEO Tim Cook sits on NIKE, Inc. (NYSE:NKE)‘s board of directors, and he’s been photographed wearing a Nike+ FuelBand.
Beyond providing the time, the FuelBand has a sports-tested accelerometer to track calories burned, steps taken, and the proprietary NikeFuel metric that is synced up with smartphone apps via Bluetooth and can be used to partake in immersive goal-oriented games.
With all of that in mind, where does Apple raise the bar? It can’t simply slap a bracelet around an iPod nano and call it an iWatch. Apple can’t ignore the success of Nike’s FuelBand — and even cheaper FitBit and Jawbone trackers — as lifestyle bands.
Even if it incorporates Pebble’s functionality with FuelBand’s lifestyle features, it won’t be breaking new ground for too much longer. Until Cook resigns from Nike’s board given the conflict of interest, let’s assume that Apple’s not gunning for the fitness lifestyle market beyond possibly making Nike a default app. That can happen, but it may also limit Apple to Nike’s own shortcomings against rival devices that monitor sleep and perform daily diet planning.
4. The iWatch may not be a jack of all trades
The iWatch will probably be more iPod than iPhone, and that should lead folks to question the move in light of two years of declining iPod sales.
Why are sales of Apple’s media player sputtering? Well, the likely reason is that iPhones and even iPads do more.
There’s no denying that Apple’s watch will look great and integrate with its existing family of devices. However, unless it does a little bit of everything, it will be hard to justify slapping an iWatch on one’s wrist.
5. Apple will probably price itself out of the market
Pebble and Nike’s FuelBand retail for $150. Since the iWatch is unlikely to have 4G LTE connectivity — because who wants to pay $20 to $50 a month for access on a watch — there won’t be any wireless carrier subsidies to save Apple from having to sacrifice margins here.
Apple can take the high road and aim for a sliver of the market the way it did with Macs when PCs were selling, and it probably will. However, Apple will ultimately have to make a choice between high sales and high margins.
It won’t be able to score both, and that’s why the iWatch won’t change the world.
The article 5 Reasons Why Apple’s iWatch Will Fail originally appeared on Fool.com and is written by Rick Aristotle Munarriz.
Longtime Fool contributor Rick Aristotle Munarriz has no position in any stocks mentioned. The Motley Fool recommends Apple, Fossil, Google, and Nike. The Motley Fool owns shares of Apple, Fossil, Google, and Nike.
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