Apple Acknowledges Cellular Connectivity Problem in New Watch

Apple Inc. acknowledged problems with cellular connectivity in its newest smartwatch, raising questions about the device's most significant feature days before it goes on sale in stores in the U.S. and other countries.

In a statement Wednesday, Apple said the problem connecting to cellular networks occurs when the Apple Watch Series 3 -- the first watch from Apple to feature an LTE chip for cellular service -- joins "unauthenticated Wi-Fi wireless networks without connectivity." Apple said it is "investigating a fix for a future software release."

Apple issued the statement after reviewers from The Wall Street Journal and the Verge encountered problems at times making calls, connecting with the Siri virtual assistant and maintaining a cellular-network connection. The Journal ran into issues across multiple wireless carriers.

Reviews from the New York Times, USA Today and other outlets didn't report significant issues with calls and connectivity. A spokeswoman for T-Mobile US Inc. said it tested the watch extensively and it "performed well" on the company's network. AT&T Inc. referred questions about the issues to Apple.

Apple's stock was down 1.8% in afternoon trading in New York.

Wall Street views the Apple Watch, the first completely new product released under Chief Executive Tim Cook, as a bellwether for the company's ability to create new devices that diversify Apple's revenue, two-thirds of which come from iPhone sales.

Apple hasn't disclosed smartwatch sales to date. Market researcher IDC estimates it sold an estimated 30 million Apple Watches since introducing the device in 2015, making it the world's largest smartwatch company by sales. But the device has failed to generate the type of sales growth Apple saw in the early days of other products such as the iPhone and iPad.

The new Apple Watch with LTE goes on sale in stores Friday for $399, and been available for preorder online since Sept. 15. The promise it can operate independently of an iPhone or Wi-Fi has raised sales expectations.

Loup Ventures, a venture-capital firm specializing in tech research, expects the Series 3 model to lift Apple Watch sales nearly 60% to 26 million units in fiscal 2018, up from 16.4 million units this fiscal year. As of Wednesday, delivery for most models of the new watch was expected to take three to five weeks.

Analysts expect Apple Watch Series 3 to get a sales push from wireless carriers motivated to sell the watch with a supporting $10 monthly data plan. They also believe its new capabilities could attract consumers who passed on the product following its 2015 debut because of its seeming lack of purpose.

When Apple introduced the Series 3 model at its product showcase Sept. 12, Apple Operating Chief Jeff Williams said it would give people "the freedom to go anywhere with just your Apple Watch."

He said it would stream 40 million songs to his wrist and have the same phone number as the owner's phone. He demonstrated its abilities by dialing a colleague who received the call on her Apple Watch while paddleboarding on Lake Tahoe.

What is holding the watch back from mass-market appeal is that it is still too focused on health and fitness, said Jitesh Ubrani, a smartwatch analyst with IDC. Apple needs developers to make different kinds of apps so the watch can become a "need to have" device. Cellular capability "gives them a chance," he said.

Mr. Williams, who oversees the smartwatch, has been pushing for cellular connectivity since before the device's launch, according to a person familiar with the product's evolution. However, Apple struggled with poor cellular reception, the person said.

Hardware experts have said the challenges reflect the difficulties of working with such a small device. Apple crams accelerometers, gyroscopes, heart-rate sensors and 18 hours of battery life, as well as GPS, Bluetooth and Wi-Fi connectivity, into a product that is just 38 millimeters or 42 millimeters in size.

Apple isn't the first company to offer cellular connectivity on a smartwatch. Samsung Electronics Co. currently offers it on the Gear S3 watch, a device that is thicker and noticeably heavier than the Apple Watch.

--Drew FitzGerald contributed to this article

Write to Tripp Mickle at Tripp.Mickle@wsj.com

(END) Dow Jones Newswires

September 20, 2017 14:35 ET (18:35 GMT)