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Why Apple Inc. (AAPL)’s iWatch Will Be an iPod

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Tim Cook’s recent appearance at D11 threw gasoline on the fires of speculation about new Apple Inc. (NASDAQ:AAPL) products, and convinced many observers that a raft of new products, including the much discussed iWatch, was in the works, but Apple’s wearable tech in the near future will be evolutionary, not revolutionary.

Apple Inc. (AAPL)

Reading into Cook’s statements

Given that there hasn’t been a new product announcement from Apple since October 23, 2012, it was to be expected that people might read more into Cook’s statements than was warranted.
For instance, Piper Jaffray’s Gene Munster, a long time Apple Inc. (NASDAQ:AAPL) bull, stated according to Philip Elmer-Dewitt:

“We felt that after viewing the conversation, it seems fairly certain that Apple will launch a television, a watch, and multiple iterations of the iPhone by the end of 2014 as well as a potential new service offering.”

A watch by the end of 2014? Given that the Pebble and the I’m Watch already exist as products, I hope it doesn’t take that long.  In fact, I don’t think it will.  But Cook made several points about smart watches that bear repeating:

1) There are lots of wearables that do one thing really well.  Cook pointed to the Nike Fuel Band as an example.  But he said there was “nothing great out there” in wearables that try to do more than one thing.

2)  Most young people don’t wear watches, since their phones have become their time pieces. In order to convince them to wear a smart watch, it would have to offer an “incredible experience.”

The logical conclusion from points 1) and 2) is that current smart watches will have very limited appeal, especially among those not inclined to wear a watch.

Technical challenges

Offering an incredible experience in a watch is technically very challenging.  There are two basic problems: battery life and display size, since being wrist mountable means limiting both.  Even then, smart watches tend to push the limits of what people will put on their wrists.

Currently, smart watches tend to be smartphone accessories, allowing the user to view incoming call and message announcements.  For the most part, Apple Inc. (NASDAQ:AAPL) has left iPhone accessories to third parties.  Apple needs to do that in order to encourage companies to make accessories and become part of the iOS ecosystem.

Would a wrist mountable, fully fledged iPhone be really cool?  Sure.  It just isn’t feasible right now, or even by 2014.  Driving a cellular radio requires a great deal of power, and the battery for the device would be huge.  As for a flexible glass, wrap-around display, I doubt that Apple would want to incur the product liability.  The display would be easily shattered, producing glass shards in an unfortunately vulnerable area of the human body.

Ingenious solution

In light of the battery/display size equation, Google Inc (NASDAQ:GOOG) Glass appears to be a particularly ingenious solution.  The display is actually quite tiny (roughly a 1/4 inch square) so that the power requirement is very small.  Through the use of clever optics, the display has a virtual size that appears quite a bit larger to the eye, equivalent to a 25 inch screen viewed from 8 feet away.  Minimizing the power requirement of the device while maintaining an acceptable subjective display size is a powerful advantage that Google Inc (NASDAQ:GOOG)’s competitors should not underestimate.

Mounting the Google Glass display in an eyeglass frame was a necessity driven by the desired physical size of the source display.  Whether many consumers will want to wear the devices frequently remains to be seen, but I think Cook may have underestimated the market for the device.  He correctly pointed out at D11 that most people only wear glasses when they need to, and want them to be as unobtrusive as possible.

This first generation of Glass is far from unobtrusive, but subsequent generations will become smaller and lighter, inevitably. It’s not difficult to foresee a time in the near future when the image projector optics can be concealed behind sunglass lenses, making them easy to wear outdoors or while driving without feeling conspicuous.

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