It’s rare to see a watch on the wrist of anyone under the age of 40. After all, consumers need only look at the computer in front of them or the smartphone in their pocket to find out the time, date, temperature, or location of the nearest clock.
As electronics manufacturers realize that time of day is only the beginning of the information consumers want to have at their disposal, big-name companies are scrambling to be the first to satisfy that desire. The “smartwatch,” as the industry has dubbed it, will act as a more accessible version of a smartphone. Call it Google Glass for the wrist. These devices will provide an at-a-glance look at what’s happening on the smartphone tucked into a consumer’s purse.
Sony Corporation (ADR) (NYSE:SNE) was among the first big names to attempt a smartwatch that communicated with a user’s smartphone. But since it’s only compatible with an Android model, iPhone and Windows Phone users are out of luck. Only certain Android phones worked with the first-generation smartwatch, narrowing the market to consumers who were willing to let their watch drive their choice of phones.
The release of the Sony Corporation (ADR) (NYSE:SNE) watch went largely unnoticed, but now, competitors like Pebble have popped up. Sony hopes to gain more of the market with the release of its Smartwatch 2, still only usable with Android devices. Sony promises the longest battery life of any smartwatch with its new device, as well as a color display not found in competing smartwatches.
The company released the Smartwatch 2 just ahead of its earnings report, hoping to continue to make a profit. For its most recent fiscal year ending in March, Sony reported its first profit in five years. Unfortunately, this profit was largely due to restructuring and staff reduction of more than 10%. In its most recent quarter, the company reported a $9.5 billion profit (93.91 billion yen), compared to a sizable loss a year earlier.
Because the success was due to restructuring, analysts are skeptical the company can continue to turn in this type of profit. However, Sony is optimistic, predicting a net profit of more than 50 billion yen (roughly $5 billion) in the coming fiscal year. If the Smartwatch 2 is a big hit, the company may be able to overcome its recent losses.
Apple begins trademarks
For months, rumors about an Apple Inc. (NASDAQ:AAPL) smartwatch have been hot and most recently the company trademarked the name “iWatch” in Taiwan, Russia, Mexico, and Japan. The iPhone’s market share has declined more than 10% since December and now owns only 41% of the U.S. smartphone market.
Android-based phones now comprise more than half of the smartphone market. With this in mind, if Android-compatible smartwatches take off, Apple could lose customers due to lack of compatibility. Of course, compatibility may not be a problem if Apple Inc. (NASDAQ:AAPL) can design the best product.
In its second quarter, Apple Inc. (NASDAQ:AAPL) saw its first year-over-year decline in earnings in ten years, coming in at $43.6 billion in revenue and $9.5 billion in profit. Increasing competition, as well as the lack of a new product release during the quarter, caused sales to lag on the heels of the busy Christmas season. Management already stated it expects third-quarter sales to come in $10 billion lower than in its most recent quarter, due to lower iPhone orders during the quarter.
Apple Inc. (NASDAQ:AAPL) isn’t the only company filing trademark applications. The always-innovative Samsung Electronics Co., Ltd. (KRX:005930) recently filed to trademark the name “Samsung GEAR,” for what could be its much anticipated smartwatch offering.
Samsung Electronics Co., Ltd. (KRX:005930) is currently suffering from downgraded expectations due to disappointing orders of components for its latest device. The company’s stock has declined recently due to concerns that the Samsung Galaxy 4 might fall prey to lower sales as consumer excitement dwindles.
Still, the company is expected to report a 56% rise in profits due to the success of its smarthphones. For its first quarter, Samsung reported record numbers, with net profit climbing 44% year-over-year. In the previous quarter, it reported 54% growth, which led analysts to speculate the company was slowing down.
To continue to meet expectations, Samsung will be required to remain ahead of the market, coming up with innovative products that change consumers’ lives. A smartwatch could be just the item the company needs to keep Samsung on top.
High Expectations
All three companies have high expectations, but just because Sony is first on the market, doesn’t mean the company will win the smartwatch war. Samsung and Apple Inc. (NASDAQ:AAPL) both have a record of meeting consumer expectations.
With Android splitting the market between so many manufacturers, though, Apple could win. And that’s because it creates products that work well with its existing products. With competition ramping up, Apple is working hard to create a smartwatch that will rule the market. Consumers and shareholders should benefit from the effort.
The article Will Apple Build the Best Smartwatch? originally appeared on Fool.com is written by Stephanie Faris.
Stephanie Faris has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Stephanie is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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