iWatch launch may not boost Apple revenue and profit much, but it could show Wall Street that the company is still innovating
SAN FRANCISCO -- Apple could sell up to 10 million iWatches in the first year it launches the product, adding more than $2.5 billion to the company's top line and over $750 million in profit, according to a recent survey by Piper Jaffray analyst Gene Munster.
Apple shares rose 1.7% to $491.27 in midday action on Monday.
Munster asked 799 U.S. consumers whether they would by an Apple iWatch that connected to an iPhone for $350. Of those with an iPhone, 12% said they would be interested in the wearable device, while the rest said no, the survey found.
People are less likely to pay up when presented with the actual ability to buy and iPhone users outside the U.S. have less money to spend on another pricey gadget. So Munster "conservatively" extrapolated from the survey to estimate that 2% to 4% of global iPhone users may buy an iWatch in the first year it is available, likely 2014.
With a projected iPhone user base of about 293 million, that suggests first-year iWatch sales of 5 to 10 million units. If Apple ended up selling 7.5 million of the devices at $350 each and with a 30% gross profit margin, that would generate $2.6 billion in revenue and $790 million in profit, Munster estimated.
That is only about 1% of Apple's annual revenue and profit, so the direct financial impact would be limited. However, Wall Street is yearning for new, innovative Apple products, so an iWatch launch could boost confidence that the company still has its mojo.
Apple has not said whether it will launch a smart watch, but CEO Tim Cook said earlier this year at the D11 conference that wearable technology was "profoundly interesting" and that the wrist is a "natural" use case.
"While we do not view the watch as a likely needle-mover for Apple in terms of revenue in 2014, we put it in a similar category as the television in that it could demonstrate Apple's ability to innovate," Munster wrote in a note to investors.