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Latest Apple Watch estimates: 3M sales, $2B revenue, Apple’s most profitable product ever

apple-watch-sales

A leading technology analyst has estimated that Apple Watch sales in the first two weeks are likely to hit 3M, comprising 1.8M Sport models, 1.2M steel and 40,000 Editions – generating more than $2B revenue. Think Big Analytics principal Carl Howe also estimates that gross margins on the wearable are likely to exceed 60%, making the Apple Watch the company’s most profitable ever product.

[The electronics] in the expensive models are the same ones used in the Sport models, and they just don’t cost that much. And while adding Gold cases and designer bands add cost to the bill of materials, the costs are small compared to the price premiums paid for these products. Unlike in the consumer electronics business, I see no pressure for prices to fall and if anything manufacturing costs will, resulting in a very profitable business.

Howe readily admits that his analysis, like any other from outside the company, are “really just educated guesses,” but he’s a credible name and his reasoning makes sense … 

Howe bases his sales estimates on a mix of three sources: Slice sales data (which is limited to the USA, so will substantially understate global sales), polling on model orders and Quanta production estimates. Combining the three, Howe believes it is clear that initial sales will be constrained by supply rather than demand.

I believe that the 3 million Watches already in flight to consumers are simply Apple’s seeding of the market prior to adjusting the final assembly mix to the actual order flow. I also believe that Apple and Quanta have probably gained enough experience at this point to begin ramping up production to more than 2 million units a month during May and June, resulting in another 4 million or so units to be shipped prior to the end of the second calendar quarter. I don’t believe that this increased production will satisfy demand however, and I expect Apple Watches to be on  back order through much of the summer.

While different analysts come up with different sales estimates, it’s hard to see how Howe could be wrong on the likely margins. As he notes, Apple has always made high-margin products, but the premiums charged on the steel and gold models, together with the majority of the bands, are a whole new ballgame.

While Apple uses premium materials for the Apple Watch, I believe that the costs of those materials are small compared with the price of even the least expensive Apple Sport Watch. By designing cases and bands that command prices aligned with jewelry instead of electronics, Apple has positioned its smartwatch products to earn exceptionally high margins compared to its smartphone and computer lines of business.

If his numbers are correct, then the Edition will be responsible for a tiny slice of sales but almost a quarter of total revenue – and be halfway toward a billion dollar business in its own right.

His suggestion that the next-generation Apple Watch will be a minor one – “simply a software update […] with additional bands and possibly another case color” – strikes me as less likely. I’d expect another sensor or two at least. But his numbers make a lot of sense.

While most of us are still waiting to take delivery of our Apple Watches, third-party companies are already out in force with replacement bands and battery-packs. Apple may not be done with its own band choices, Jony Ive revealing a range of new Sport band colors in Milan last week. It’s not yet known whether these are special editions or will go on general sale.

Via Daring Fireball

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Comments

  1. bloodymerzkizzoid - 9 years ago

    Kaching!

  2. Leif Paul Ashley - 9 years ago

    Well – guess that answers the question of will it sell lol

  3. monty72 - 9 years ago

    Stupidity TAX! Don’t blame them though, why wouldn’t you? If stupid is out there why not TAX them.

    • Jörg Wißemann - 9 years ago

      how much did you have to pay for your comment?

      • monty72 - 9 years ago

        Somewhere around the 12K mark

      • monty72 - 9 years ago

        Nice beard by the way

    • RP - 9 years ago

      None of this takes into account the development time, care and talent for most Apple products. That’s the tax. And people who love great products know that and want that.

      Android Wear products look like the shoddy hastily put together products they are. And anyone who has already bought one has already paid a hefty fools tax. Especially if you go out in public with one, that’s a fools tax that keeps on charging.

      • monty72 - 9 years ago

        I was referring to the Edition, look at the quantities to revenue ratio, that’s a stupidity TAX. Also I know this is subjective but I also think the Edition looks cheap and a bit naff.

      • xprmntr - 9 years ago

        Can u blame a company that knows it can sell thousands of watches for at least 10k? Like shooting fish in a barrel, all that money could translate into better products due to more r and d investment etc

  4. beyondthetech - 9 years ago

    I would tend to agree with the “minor update” part. I would even wager that since Apple can replace the battery on the WATCH, there’s little reason why the entire logic board and touchscreen can’t be replaced either, and therefore possibly upgraded with a newer logic board with an additional sensor and/or a more-efficient touchscreen and display.

    • rnc - 9 years ago

      Yes, you can upgrade the scree, the logic board and substitute the battery.

      Just buy a new one.

  5. 89p13 - 9 years ago

    I went to a “try on” on Saturday, just to see what size I liked better. Salesman was knowledgeable and very helpful and I told him I was just “Kicking The Tires” and he made no attempt to “sell” me (or my wife) one.

    I was extremely impressed with the Stainless Steel link band watch, although I really liked the Space Black model. Unfortunately that model was in the non-opening display case. We spent about 30 minutes with the salesman and walked away satisfied with our visit.

    When I got home – I went on-line and ordered the 42mm Space Black with the link band – even though I have publicly declared that I wanted to wait and see if they would release a titanium case & band version and made the noise that I was going to wait for the 2nd Gen – as that what the “smart Apple user” does.

    I still have 2 months to cancel if I get buyer remorse . . . but, knowing me, that’s unlikely.

    Come On, July (or, June if Tim is to be believed).

    • drhalftone - 9 years ago

      You need to buy a watch bumper, and then you still need to purchase a second cover to add your own unique style to the first bumper. And after that, you need at add flair to the second cover to further show off you own personal style/taste. So you have just two months to find the right combination bumper/cover/flair. Is that going to be enough time?

      • 89p13 - 9 years ago

        And you need a life!

        I’m quite content with what the designers at Apple have come up with, thank you very much!

  6. Jeff Colvin (@jeffcolv) - 9 years ago

    Some people have far too much money. I wish I was able to spend 10k+ on an item that will be obsolete in one year.

    Good for Apple though. Having a new product that isn’t even released yet, already being marked as their most profitible product ever is really quite incredible.

    • TJ (@tjskywasher) - 9 years ago

      Why will it be obsolete in a year? It will still continue to receive software updates for the next few years and the watch will continue to function long after that.

      • Jeff Colvin (@jeffcolv) - 9 years ago

        That’s true. Perhaps the word obsolete is a little dramatic. It will lose significant value in a year when a newer model is available, and within 3-4 years it will be very old and worth nothing but it’s weight in gold.

        I just feel that the “Watch Edition” is an awkward product because it’s a computer first, and then a watch. It would be like spending $10,000 in 2011 on an iPad 2, which is relatively slow in speed, and bulky in design to today’s standards.

        It’s kind of like a car, I guess. Overpriced, diminishes in value quickly, and upgrades come every year.

        If I was going to spend $10k on a watch, I’d personally rather purchase a Sport version, and the remaining $9500~ on a good mechanical watch.

      • xprmntr - 9 years ago

        10k to these people is peanuts

  7. iWagsz (@Iwagsz) - 9 years ago

    How can it be Apples most profitable product ever unless they are really ripping their customers off?

    • Why do you think they are the richest company in the world? They don’t sell the most – but they make the most money off everything they do sell.

      That’s not ripping people off though – that’s just having a higher margin than everyone else, and a fanbase willing to pay for it.

  8. galley99 - 9 years ago

    That product mix seems much more likely. The “85% Sport” projections were way off.

  9. Don_Afrim (@don_afrim) - 9 years ago

    Apple Watch will fail. At max there will be a 2nd version before its shut down.

    • dailycardoodle - 9 years ago

      Love these comments, it’s fun to look back and see how wrong (and confident!) people were. See iPod, iPhone and iPad comments after release – hilarious!

      • 89p13 - 9 years ago

        Could this be that “other troll” who used to haunt the 9 to % boards around the time that the 6 / 6Plus came out? I can’t remember his name – but he sure was a Shamesung troll of the lowest order.

        Trolls are always getting reborn – and I really love to read their inane and stupid posts.

        Keep it up, Don_Afrim – we really need the entertainment!

    • motorheadwilly - 9 years ago

      Troll

    • xprmntr - 9 years ago

      Oh suuure,?thats seems like a very likely outcome. Would you happen to have your own blog? I’d love to read your other analysis.

    • Are you trying to sound like an incompetent moron? If so, then you’re succeeding greatly.

    • scumbolt2014 - 9 years ago

      Yeah. Steve is rolling in his grave.

      Because you’re such a doofus.

  10. incredibilistic - 9 years ago

    “By designing cases and bands that command prices aligned with jewelry instead of electronics, Apple has positioned its smartwatch products to earn exceptionally high margins compared to its smartphone and computer lines of business.”

    This was the key line for me and why Apple’s strategy can’t be touched.

    As it’s been stated before, Apple is positioning the Apple Watch as a fashion accessory first and a piece of tech second. Hence the reason why the Edition model is powered off during try-on sessions.

    It’s also why techies still seem befuddled by the device because their approach is centered around technology and not fashion.

    These estimated guesses are nice but I’d rather hear it from the horses mouth. Come on Apple, release the real numbers!!

  11. Laughing_Boy48 - 9 years ago

    How can they say this. It’s seems as though Apple’s share price has fallen steadily since the AppleWatch launch. Apple’s recent share price moves have been no better than the general market or comparable consumer tech stocks. AppleWatch launch weekend appeared to be just another lost weekend for Apple shareholders.

  12. scumbolt2014 - 9 years ago

    Major flop

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Avatar for Ben Lovejoy Ben Lovejoy

Ben Lovejoy is a British technology writer and EU Editor for 9to5Mac. He’s known for his op-eds and diary pieces, exploring his experience of Apple products over time, for a more rounded review. He also writes fiction, with two technothriller novels, a couple of SF shorts and a rom-com!


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