Apple Watch was presented for the first time to the public last September. During the keynote, several executives of the company showed how us different aspects of the first wearable Apple. It was then followed by a very controlled demonstration in an even more controlled area created especially for the occasion. Exposed devices were nothing more than units dummies without possibility of interaction by the user.
While we are talking about a product that just we know details, Apple does not want to put it easy competition with products already in the street for years. The Californian company is paving the way towards the success of your watch.
To do so does not hesitate to hide sales (whether they are good as if they are bad) of the Watch in their quarterly reports. Let’s see what are the plans and the reasoning behind them.
“Other products”, the new segment of Apple
Apple tends to give detailed information on their financial reports
One of the things that most surprised me when I started to analyze the financial results of Apple is its transparency. I have analyzed other companies in the sector and none gives so much detail, so We can rule out is a legal imperative sec (something like the American CNMV).
Any company that quoted on stock exchange has the duty to provide information sufficient to its shareholders. But few give much detail. Data that has traditionally provided Apple of Wall Street “costumes” on their segments (product lines) are:
- Total revenue of each line without broken models or types. I.e., Apple says how much has entered the Mac or iPhone each quarter, but does not report how much corresponds to the range MacBook Pro or iPhone 16 gigs yellow 5 c model.
- Similarly, it also tells us how many units sold iPad or iPod, not to mention amounts according to models or specific ranges.
This has been so since the beginning of time. Despite this transparency, while the technology company says how much enters each segment, there we bring benefit under the arm. Which obliges to do calculations with margins and other estimates that never cease to be that, approaches. A real shame.
On the other hand, that there were moments in which Apple has hidden behind the financial nomenclature to protect their own interests. The first quarters after the release of the iPod and iPhone, Apple gave very vague data about the number of units sold or revenue.
The key is in the price average sales
The upper graph shows average 14 years selling prices for Mac, iPod, iPhone and iPad. The Green and yellow lines fluctuate a lot the first quarters due to the lack of transparency in the data. But with the time steady.
This is because income and units of each of these products were counted within the segment “Peripherals & accessories”. A kind of catchall financial where is “masking” the real numbers. But, what does so much secrecy? Why is it so important to hide these numbers?
What is so important in these numbers to hide them?
Because Apple breaks down revenue and units of its segments, it is possible to calculate the average price of sale we saw at the beginning of the paragraph. This fact that apparently is so insignificant, provides lots of information about the performance of a product on the market.
Starting with this issue, a person with basic financial knowledge can create a model that will reveal the mix of sales very close to reality. With it, you can determine What products work best on the market, at what price you are selling, how many units have been sold of each and, most importantly for a competitor, how to plan your own mix of sales.
The Watch in the shade
I’m not very eager to reveal many numbers on Apple Watch […] not give too many details about it because our competitors will look at them with a magnifying glass, by which helps a lot to add them from this point of view also – Tim Cook in the latest financial results Conference.
By which said Cook during the Conference, from the Q1 of FY 2015 (i.e. this quarter ending in December) will appear a new section called “Other products”. Will include sales of an iPod that has been falling several years, the hobby to Apple TV, Beats and rest of peripherals accessories.
Neil Cybart, an ex-analista of Wall Street, showed in his blog a series of predictions about the Watch. Among them are the estimate of the average price of sale of the Apple clock that we see in the table above. Their calculations are nothing more than his speculations but never cease to make sense.
According to Cybart, luxury range will be sold at a price of $7,500 (more than 6 times what we thought in September) and will be 1.5% of sales. This is the point that, for me, it is more relevant. For the competition of the Watch will be very interesting to know how many top range model units are sold and what thickness of revenues pose.
The reality is that Apple Watch is something that combines tastes and fashion with technology more than any other product so far. It is here where you will find more juicy margins and where Apple also is it played.
If the Edition of the Watch range is a success, Apple would be demonstrating that There is a market willing to pay thousands of dollars a smart watch. And that information is pure gold for LG, Samsung, Motorola and any other candidate to lead this emerging technology category.