Is Apple Watch a Failure?

It's fair to say that wearables has yet to become the major category many expected they would develop into.

Aside from some niche success from companies like FitBit (NYSE:FIT) , which seems to have created a business out of its low-cost fitness trackers, the big players have yet to score a major hit. Apple (NASDAQ:AAPL)may be the most high-profile operator in the space and it's fair to say that its Apple Watch cannot be considered a success based on what it has sold so far.

In reality, even if Apple equals the 21.4 million devices FitBit claimed in its Q4 earnings report it sold in 2015, it would still be seen as maybe not a failure, but not a clear success either. That may not be fair, but expectations are higher for a company which regularly sells more than 200 million iPhones in a year, according to numbers compiled by Statista.

Apple Watch is offered with designed bands as an option. Image source: Apple

Of course, after selling only about 10.6 million units in the eight months Apple Watch was available in 2015, according to A KGI investment note reported on by9to5Mac, moving 21.4 would be solid progress. Unfortunately the research firm expects shipments to move in the other direction.

How bad will it be?Apple is not Fitbit, but that company's sales probably do sit as the low-ground gauge for whether Apple Watch is worth it to the company. FitBit had about $1.86 billion in revenue in 2015 and Tim Cook has made it clear when talking about Apple TV that he considers the $1 billion a year mark to be an important number.

But, for Apple Watch it's not just about revenue as it's hard to argue that the product is a growing business when KGI predicts the company will ship less than 7.5 million watches in 2016, down from 10.6 million last year. That number is even more depressing when you consider that the company will have four extra months of sales in 2016.

The $1 billion number is important at least symbolically, but only in the case of a growing business. It's a milestone number for Apple TV, but only because that business reached that milestone and will continue to get bigger.

For any Apple product, it's not just about raw device sales numbers. It's about creating a user base which buys apps and entices developers to build on the platform. Even if every single 2016 buyer is a new user that would leave the company with a customer base of about 18 million for the platform. That's fine for FitBit, which has relatively simple devices which are not dependent upon keeping the developer community interested, but it's not enough for Apple.

Is Apple Watch a failure?It's not just Apple Watch which has failed so far, but also wearables in a broader sense. So far, beyond niche fitness uses, no company has created a compelling reason to own any of the high-end smart watches currently being sold.

Apple Watch, for example, requires an iPhone to make use of most of its features. That's an argument against buying one because the convenience of having a device on your wrist is minimized by having to have your phone in your pocket to make full use of it.

It's not too late for Apple Watch or high-end wearables in general, but these numbers are dismal and Apple needs a killer app to turn things around. As it stands now these device simply don't do enough that's unique from the phones everyone carries anyway to make them worth it. It's possible that will change, but so far Apple Watch has to be considered a fairly dismal failure.

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Daniel Kline owns shares of Apple. He wants an Apple Watch, but does not wear a watch and knows he would never use it. The Motley Fool owns shares of and recommends 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.

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