Google Inc (GOOG) and Apple Inc. (AAPL) Want You to Keep It in Your Pants

Page 2 of 2
Apple

Apple Inc. (NASDAQ:AAPL) appears to have been planning for a move into wearables for some time: The purchase of Siri in 2010 provided Apple with advanced voice recognition/search technology. The company is also building strong search partnerships with Microsoft (Bing), Yahoo! Inc. (NASDAQ:YHOO) and Yelp for use in Siri search.
Throw in the Apple Inc. (NASDAQ:AAPL)’s inventory of mobile “iWatch” patents, and its leadership in mobile hardware, and it stands to reason that the the folks in Cupertino are moving aggressively into wearable technology. Of particular advantage to Apple is its closed iOS ecosystem which allows for a tightly integrated solution, protecting its products from 3rd party competition.
Unlike Google, Apple Inc. (NASDAQ:AAPL) has the opportunity to capture significant incremental revenues from wearables through hardware sales. Estimates show 294 million iPhones currently in service. A 30% adoption rate for wearables by iPhone users, a low rate for Apple, would equate to sales of 88 million wearables to existing iPhone users.

Furthermore, Apple stands to capture significant service revenue through wearables. Many see wearables as part of Apple’s plans to expand into the mobile payment category, estimated by Gartner to reach $617 billion in 2016. With over 600 million active credit cards in iTunes accounts, Apple may use wearables as a way to capture a significant share of the mobile payment business.
The primary risk to Apple Inc. (NASDAQ:AAPL) is the question facing all new categories. Will an Apple wearable be widely adopted? Clearly, Apple has more at risk in this category, since wearables are seen as a way for Apple to build its hardware revenues in the face of what’s considered a maturing smartphone category. A failure in wearables could put even more downward pressure on the company’s stock.

Foolish Bottom Line

Evolving technology in wearable computers may be an under appreciated revenue catalyst in mobile category. Of the mobile OEMs currently in the market, Apple Inc. (NASDAQ:AAPL) appears to be positioned to capture significant incremental revenue if wearable technology is widely adopted. Foolish investors should pay close attention to the success of Apple’s launch of a wearable; it could be a sign of upward movement for the company’s stock.

The article Google and Apple Want You to Keep It in Your Pants originally appeared on Fool.com and is written by Bill Shambllin.

Bill Shambllin owns shares of Apple and Google. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft. Bill is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Page 2 of 2