Microsoft Corporation (MSFT), Google Inc (GOOG) & Apple Inc. (AAPL): The Wearable Computing Boom

Page 1 of 2

Computers that you wear. It sounds far-fetched, but it’s coming — no matter what you feel about it. Some early wearables do seem far-fetched. But there are plenty of other options that are coming soon, most likely before the holiday season. What companies might be able to boost profits on the wearable computing trend? Let’s take a look.

Microsoft Corporation (MSFT)

“We Need a Hit”

Firmly entrenched as a staid enterprise business, seemingly no one thinks that Microsoft Corporation (NASDAQ:MSFT) has any potential in wearable technology. It seems to always flop with Windows on phones, and its Surface tablet appears to be just a way to sell Windows 8 — which is not doing well. Microsoft Corporation (NASDAQ:MSFT) knows that it needs a consumer hit outside of the Xbox. It has been steady with R&D, keeping spending at around 13% of annual revenue in the past three years. That’s around $10 billion every year for the company to try to develop new products and services.

Mobile market share. Source: ZDNet

Hopefully, some of that spending will result in some sort of consumer wearable technology. Microsoft Corporation (NASDAQ:MSFT)needs a hit, as its income has dropped 20% from 2011 to 2012. Tried and true, it’s betting on a new Xbox. But the same company that came out with the motion gaming Kinect device has to have some sort of wearable product up its sleeve. Will it come along with the release of the next Xbox?

Finding its way into hardware

Google Inc (NASDAQ:GOOG) needs to find a way to keep advertising revenue up and growing. So, it’s no wonder that it is trying to make a big deal out of Google Glass. The idea is that releasing this product to early adopters will translate into an ecosystem around this tech — and more advertising sales somehow. There has been a tepid response to Google Glass so far. Poor battery life, limited wireless capabilities, and privacy concerns have plagued it.

Yet, Google Inc (NASDAQ:GOOG) is on to something in selling hardware. In 2012, the company reported that 8.2% of revenue came from Motorola, which sells mobile devices and other miscellaneous electronics. This diversification is important, as the company has been criticized for being a one trick pony that could dry up in a drought of advertising. Indeed, the company now derives over $6 billion in revenue from sources outside of ads thanks to Motorola.

The biggest wearable company of all?

Gartner predicts that the wearable tech market will hit $10 billion by 2016. But they expect a majority of that money will come from athletic gear that is deemed “smart.” With that, the best bet is on Apple Inc. (NASDAQ:AAPL) making the most of this market. Why? Because the demographics in the United States suggests that Apple already has a major foothold in the trend towards mobile fitness technology.

Age 25-34 iOS device owners and app usage. Source: VentureBeat

According to Apple’s most recent quarterly filing, its Americas operating income went down to $5.1 billion from $5.6 billion a year earlier even though net sales went up 6.5%. It appears that this is a trend in most other regions as well. That might suggest that producing complex devices like iPhones will continue to take a bite out of revenue. With that in mind, selling simplistic add-ons like watches or fitness bands would be a great complementary product to smartphones, helping overall growth.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!