Apple Watch order backlog will force production ramp up

Written by on April 14, 2015 in News with 0 Comments
A customer tries on an Apple Watch at an Apple Store in Paris

A customer tries on an Apple Watch at an Apple Store in Paris

SAN FRANCISCO/PARIS (Reuters) – Customers preordering Apple Inc’s smartwatch on Friday will have to wait at least a month for delivery, a sign of strong early demand for company chief Tim Cook’s first new major product.

People flocked to Apple’s stores around the world to get a close-up look at the Apple Watch, the tech company’s foray into the personal luxury goods market, with Apple predicting demand would exceed supply at product launch.

Cook, interviewed on cable television channel CNBC, said initial orders were ‘great’ for the device, available for preorder online and to try out in stores by appointment, but not to take home.

“We view this as an indication of solid demand paired with very limited supply,” Piper Jaffray analyst Gene Munster wrote in a note to clients. “We continue to expect modest sales in the June quarter as demand ramps over time.”

A key factor in the watch’s success will be demand once an initial wave of interest from Apple enthusiasts subsides.

The watch goes on sale officially on April 24, online and through appointments in shops, including trendy fashion boutiques in Paris, London and Tokyo, part of Apple’s strategy of positioning the wearable computer as a must-have accessory.

But soon after online preorders opened on Friday, Apple’s website listed shipping times in June for some models of the watch and four to six weeks for others.

There was immediately brisk bidding on eBay for confirmed orders for watches, with hundreds of sellers looking to make a few hundred or even thousand dollars by passing on their watches, once received.

Testing Apple’s mastery of consumer trends, the watch is an untried concept for the Cupertino, California-based company. It straddles a technology market accustomed to rapid obsolescence and luxury goods whose appeal lies in their enduring value.

The Apple Watch sport starts at $349 (239 pounds) while the standard version comes in at $549 in the United States. High-end “Edition” watches with 18-karat gold alloys are priced from $10,000 and go as high as $17,000.

At a San Francisco Apple store, dozens of customers crowded around newly installed wooden cabinets, snapping pictures of the gadgets on display under glass. Apple employees, admittedly still unfamiliar with the watches’ finer points, guided customers through features like text messaging, maps and fitness tracking.

MIXED REVIEWS

At Apple’s flagship store in New York, Jack Weber, who was visiting from Charlottesville, Virginia, said he would give his wife a top-of-the-line “Edition” as a 50th-anniversary gift.

“What more perfect wedding present could there be than this watch?” he said.

Long wait times will likely stimulate more demand for the watch – which allows users to check email, listen to music and make phone calls when paired with an iPhone – with little risk of losing impatient customers, said JMP analyst Alex Gauna.

“You would want to catch up by the holiday season,” Gauna said. “But based on what’s out there in Android land, I don’t think there’s an extreme risk in near term of losing customers who must have a smartwatch and will go to some alternative.”

Android is Google’s mobile operating system used on many smartwatches.

Reviewers this week praised the watch as ‘beautiful’ and ‘stylish’ but gave it poor marks for relatively low battery life and slow-loading apps.

Sales estimates for 2015 vary widely. Piper Jaffray predicts 8 million units and Global Securities Research forecasts 40 million. By comparison, Apple sold nearly 200 million iPhones last year.

Apple’s watch is widely expected to outsell those by Samsung, Sony Corp and Fitbit. It will likely account for 55 percent of global smartwatch shipments this year, according to Societe Generale.

“Apple will outsell its wearable rivals by a very wide margin but it will do this on the power of its brand and its design alone,” independent technology analyst Richard Windsor said.

Apple Inc is likely to quickly ramp up production of the Apple Watch after strong pre-orders outstripped limited supply, analysts said on Monday.

Apple’s website lists shipping times in June for some models, and four to six weeks for others, suggesting the company is straining to meet demand.

However, analysts said Apple could sell between 2.3 million and 4 million watches in the quarter ending June. Apple was widely expected to disclose pre-orders on Monday, following its usual pattern after a product launch.

Estimates by shopping data firm Slice Intelligence and brokerage Cowen and Co pegged bookings on Friday, the first day of pre-orders, at about 1 million in the United States.

For comparison, about 720,000 Android-powered smartwatches offered by companies including Samsung Electronics Co Ltd and Sony Corp were shipped in all of 2014, according to market research firm Canalys.

Analysts at brokerage Pacific Crest said their checks showed that Apple appeared to be ordering components for the watch that would allow it to make well over 20 million this year.

UBS estimates that Apple will sell 16 million watches in fiscal 2015 ending September and 40 million in fiscal 2016.

Apple shares closed 0.43 percent higher at $127.10 on Nasdaq.

(By Noel Randewich, Astrid Wendlandt, Tenzin Pema and Subrat Patnaik; Additional reporting by Devika Krishna Kumar in Bengaluru, Teppei Kasai in Tokyo, Paul Sandle in London, Pauline Askin in Sydney, Malathi Nayak in New York, Yasmeen Abutaleb in San Francisco, Bill Rigby in Seattle,; Editing by Keith Weir)

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