Apple Inc. (AAPL) Smartwatch Is Still Dominant Despite All the Doubt

When Apple Inc. (NASDAQ:AAPL) CEO Tim Cook went on the attack against claims Apple Watch sales were in the dumpster his comments about record holiday sales were taken with a healthy dose of skepticism.

After all, it was his job to talk up his company’s products. Even a similar claim in Apple’s Q1 earnings report seemed questionable, with no detail provided. However, a report on global smartwatch shipments for Q4 2016 supports AAPL’s claims.

The numbers say Apple Watch sales did indeed set a holiday record and took an even larger share of overall smartwatch sales that quarter than in the 2015 holidays.

Defending Apple Watch Sales

Tim Cook had his work cut out for him after AAPL launched the Apple Watch Series 2 in September. Apple was counting on the new model to boost sales going into the holiday quarter of a year where consumer interest in smartwatches was slipping. Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) opted to skip its expected Android Wear 2 smartwatch operating system upgrade. Pebble, the early smartwatch pioneer, would soon collapse and have its assets bought up by Fitbit Inc (NYSE:FIT).

When research firm IDC released a report in December saying Apple Watch sales had tanked, dropping 71% from the previous year, Cook went on the offensive. In an e-mail to Reuters, he wrote:

“Our data shows that Apple Watch is doing great and looks to be one of the most popular holiday gifts this year. Sales growth is off the charts. In fact, during the first week of holiday shopping, our sell-through of Apple Watch was greater than any week in the product’s history. And as we expected, we’re on track for the best quarter ever for Apple Watch.”

The problem was, with a new model just launched and the crucial holiday shopping season ramping up, everyone was expecting AAPL to put a positive spin on Apple Watch sales. And without numbers to back it up, Cook’s statement wasn’t necessarily taken at face value.

Even Apple’s Q1 earnings report, where the Apple Watch was noted to have set an “all-time revenue record” didn’t convince everyone. AAPL didn’t spike out any actual number to back that up and the Other division that includes the Apple Watch saw its revenue drop 8% year-over-year.

AAPL Wasn’t Blowing Smoke About Apple Watch Sales

Research firm Strategy Analytics released its report on global smartwatch shipments for Q4, 2016 (the period corresponding to AAPL’s Q1 2017). In it, global smartwatch sales are shown to have recovered from a slow first half, to mark a 1% increase over 2015. As for the Apple Watch?

“Demand for Apple’s new Watch Series 2 as a holiday-season gift in Western markets was surprisingly strong and it enabled Apple to clear a large backlog of smartwatch inventory during the quarter.”

According to Strategy Analytics, that translated to a record 5.2 million Apple Watch sales in the fourth quarter, up from 5.1 million the previous year. In addition, while AAPL lost ground in the overall smartwatch market in 2016 — dropping to a 55% share compared to over 65% in 2015 by selling 2 million fewer smartwatches on the year — during the holiday quarter, the company captured over 63% of all smartwatch sales.

Where Does This Leave AAPL and the Apple Watch?

Apple is still the dominant smartwatch maker, and the Apple Watch Series 2 showed the company isn’t sitting still. Its overall market share dropped to 55%, but it remains firmly on top.

Second place Samsung Electronics Co Ltd (OTCMKTS:SSNLF) took a big hit over the holiday quarter, despite releasing a new model of its own, the Gear S3. Samsung’s holiday quarter marketshare dropped from 16% to 9.8%, while its overall marketshare for 2016 dropped from 13% to 11.4%. A collection of other manufacturers from Fitbit to LG took over one third of the market in 2016 (up from 21.6%) showing the increasing diversification of smartwatch sales.

The smartwatch market still isn’t setting the world on fire, but despite a slow 2016, any reports of its death are greatly exaggerated. And while AAPL is sharing the market with an increasingly diverse group of competitors, Apple Watch sales have not cratered. They were down overall for the year, but Apple maintained a dominant position and the new Apple Watch Series 2 did indeed propel the company to record smartwatch sales over the holidays.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.


sumber : InvestorPlace



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