What is a smartwatch?
The definition of a smart watch is a computerized wristwatch with functions that go beyond timekeeping. Essentially smartwatches are mini PDA’s, previous incarnations performed tasks like calculators or playing video games. Today’s smartwatches run mobile apps, others have mobile phone capabilities. A select few run applications based on the Android platform while syncing to your smartphone. The bluetooth capability of these watches is a selling point manufacturers are pushing.
Smartwatch manufacturers
The international trademark for “iWatch” has been filed in Russia, Japan and now Mexico as of June the 3rd. Apple Inc. (NASDAQ:AAPL) is currently working on the iWatch, a device that will compete in the emerging smartwatch market. Apple Inc. (NASDAQ:AAPL) has released little information regarding this device that is supposed to have a 1.5 inch curved screen. The Economic Times, the Taiwanese news source, stated 1,000 trial models have been shipped to manufacturing partner Foxconn with a tentative launch date at the end of 2013.
How does the iWatch impact earnings per share, or EPS, for Apple Inc. (NASDAQ:AAPL)? To answer this question we must do an analysis of the iPhone and iPad the most similar products to the iWatch. Apple earned $3.17 total for the four quarters before the iPhone launch of 2007, this increased to $5.11 total for four quarters after the iPhone launch, an increase of 62 percent. Apple Inc. (NASDAQ:AAPL) earned $11.78 for the four quarters before the iPad launch of 2010, and earned $25.26 total for the four quarters after the iPad launch, for an increase of 114%.
Apple Inc. (NASDAQ:AAPL), right now, is considered a value company rather than a growth company due to lack of recent innovations from an investors standpoint, the iWatch could change all that. I expect the iWatch to be retailed for $300 to $400 per unit. Apple’s current Price/Earnings, or P/E, multiple is 10.6 compared to a 20.2 P/E when the iPad launched in April 2010. Apple Inc. (NASDAQ:AAPL)’s P/E ratio was 33.4 before the iPhone launch but rose to 38.5 when the iPhone was released.
Sony Corporation (ADR) (NYSE:SNE) is currently marketing the SmartWatch, the Android compatible wrist watch available for consumers. The Sony Corporation (ADR) (NYSE:SNE) wristwatch is being marketed as a lifestyle device that will bridge the gap with your smartphone.SmartWatch also has a touchscreen that allows the consumer to scroll and see what your friends are up to on Facebook. Reading email and text messages at a glance has never been so convenient.
The Xperia X10 was the first phone in the Xperia range to feature Android OS in 2010. Sony’s Xperia Z has enjoyed strong sales numbers since its debut in February 2013, the upswing in sales should contribute to $489 million in profit for Sony Corporation (ADR) (NYSE:SNE) this year, according to their estimates. Sony Corporation (ADR) (NYSE:SNE) currently has an EPS of $0.51 this should increase with competent marketing of the SmartWatch Android compatible watch.
The next major competitor to enter the race of the smartwatches is Google Inc (NASDAQ:GOOG). There is no official name for the wristwatch as of yet, Google Inc (NASDAQ:GOOG) smartwatch has been shown in the Berlin, Manchester and Mountain View offices. There is no tentative release date so far; Google Inc (NASDAQ:GOOG) has not even released who will manufacture this wristwatch. All we currently know is this device will function with your smartphone.
How did the Nexus smartphone impact EPS for Google Inc (NASDAQ:GOOG)? This one is a little tricky to calculate, Google sells the smartphone strictly online and relied on word of mouth to sell this device. Google Inc (NASDAQ:GOOG) is a game changer in the telecom world, selling a smartphone without a contract giving the consumer the freedom to go with any carrier they want. Smartphone sales factor a smaller percentage of this companies income. Total EPS in 2009 was $20.41 before the Nexus launched in January 2010, this number increased to $26.31 in 2010. In 2012, the total EPS increased to $32.31 coinciding with the release of the Nexus 4. Consumers love the Android OS available on the Nexus and Tablets.
Current market for smartwatches
For long term investors to make an educated investment decision regarding computer wristwatches we have to look at existing demand. Currently smartwatches are a first generation device, with small market share, used as a compliment to smartphone users. As a relatively new technology, there are limited stats for the smartwatch.
What are the future advantages of investing in companies that are investing money in this technological add on to the smartphone?
Kickstarter the largest investment fund for technology, film, art, design and more raised $2.6 million from 18,867 backers for manufacturing the Pebble, a smartwatch that operates on Android and iOS platforms. The makers of Pebble intended to only raise $100,000. To date the Pebble project has raised $10 million, more than any other Kickstarter program to date. The designer of the Pebble is Eric Migicovsky who has a successful history of designing smartwatches. Eric’s first project was the inPulse smartwatch for Blackberry.
Future forecast
The overall interest in the Pebble means there is sufficient interest from the general public to invest in smartwatch technology for the future. Pebble will arrive at a Best Buy Co., Inc. (NYSE:BBY) near you July 7.
The burgeoning market of apps created specifically for the smartwatch is limitless. Consumers want convenience to the online world the easiest way possible. According to Consumer Electronics Association, or CEA, research reports smartphones continue to be the driving force in the mobile industry with unit sales projected to reach 130 million this year, sales were 111 million in 2012. The increase in the smartphone market will have a direct impact on how popular the smartwatch will be in the future.
Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG) are thecompanies I have on my hot list. Sales of this technology from 2013 onward will be a major indicator to decide to invest in companies that provides a user friendly multi-function device to use with a smartphone.
The article Smartwatches and the Battle for Your Wrist originally appeared on Fool.com and is written by Robert Palmer.
Robert Palmer has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google. Robert 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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