A new era is on the horizon for tech giant Apple .
Continue Reading Below
In only few weeks, Apple will begin selling the first device of the post-Jobs era -- the Apple Watch. Although plenty have speculated, few know exactly what kind of financial impact the Apple Watch could produce in the short term or the long term. However, if one recent report is correct, a successful rollout of the Apple Watch could be facing a serious uphill battle.
Supply strains for Apple Watch According to reporting from AppleInsider, a "person familiar with Apple's internal logistics" recently disclosed that Apple's Watch manufacturing has encountered issues "at every stage of the development." This probably shouldn't come as a huge surprise. Supply issues are common with plenty of new products, especially at the scale at which Apple operates.
Although there's wide absolute range, the average analyst estimate sees Apple shipping 14.6 million Watches this year. However, some of these estimates refer to the calendar year 2015 and others to Apple's fiscal year 2015, which began in late September. Either way, that 14.6 million figure indicates the broad expectation that Apple will ship a lot of Watches in the coming months.
Why this mattersIf this were any other Apple product, supply issues wouldn't create this kind of cause for concern. However, since it's the Apple Watch we're talking about, I'd argue that a fair degree of investor consternation over this news is entirely understandable.
Apple's iPad business, and especially its iPhone business, will continue to provide the tech giant with growth tailwinds in the coming years. However, as both markets mature, Apple will increasingly need to lean on new products to continue to grow. The problem is that Apple has yet to definitively prove it has the ability to successfully introduce new products since the death of Steve Jobs. Journalists have made a lot of "ghost of Steve Jobs" comments in recent years, and
the Watch stands as the most immediate opportunity to exorcise that spirit.
The real risk for Apple Watch I think the rollout of the Apple Watch carries far more risk than potential reward for Apple and its shareholders. At Apple's size, succeeding in hitting or roughly surpassing 14.6 million units shipped won't move the needle to a huge degree. It's worth noting that outsized success would obviously be a huge boon for Apple, but I'm not holding my breath for a major win. However, falling short, or even creating the perception that the Watch isn't selling well, could very easily shake the market's faith in Apple's ongoing ability to launch innovative products. And if investors lose faith in Apple's ability to innovate, things could get messy for Apple's stock in the coming months.
That said, despite this news of potential short-term undersupply, we always want to think longer term as investors. But even extending the time horizon into the medium term, or even the long term, I think Apple will need to improve the Watch further to make it a true hit. Apple's body of hardcore brand loyalists is probably big enough to support a somewhat strong launch, which says something about Apple's tremendously powerful brand that I won't get into here. However, to make the Apple Watch a truly mass-market device, I believe it will need to provide prospective buyers with a more valuable overall user experience. So with the Apple Watch's release only a few weeks away, this near-term storyline is one Apple investors will want to watch (pun intended) as closely as possible.
The article 1 Huge Risk to the Apple Watch Launch originally appeared on Fool.com.
Andrew Tonner owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
Continue Reading Below