Apple Watch Edition. Source: Apple.
Apple's unwillingness to share explicit detail about Apple Watch's financial performance is a source of investor frustration. For a company that's long been transparent with pertinent operating metrics, the opacity of the company's Apple Watch business is somewhat uncharacteristic and bound to spur speculation, for better or for worse. As you likely know by now, Apple has said that the key reason for doing this is to avoid sharing any information publicly that competitors can take advantage of. Here's how Tim Cook initially framed the decision last October:
Continue Reading Below
It also -- to be also straight, is -- I'm not very anxious in reporting a lot of numbers on Apple Watch, because of the -- and giving a lot of detail on it because our competitors are looking for it. And so aggregating it is helpful from that point of view as well.
All of this begs the question: What specific data point is Apple trying to keep from its competitors?
A tale of two ASP inputsThe two basic figures that Apple reports for all other categories are units and total revenue, from which average selling price can subsequently be derived. Ahead of the July earnings release, I didn't think Apple would be totally opaque about Apple Watch results, but unfortunately it was.
Regarding the aforementioned speculation, third-party market researchers have already put unit estimates ranging from 3.6 million to 4.2 million, not to mention the litany of the Street's best guesses. I don't believe Apple is overly concerned with these estimates on unit volumes. Even though I think the high end of these estimates is unreasonable, the lower estimates still make Apple a major player in the smartwatch market. Apple Watch revenue is included in Other Products, so there's at least some ballpark ranges that can make sense.
Here's my theory though: Apple desperately doesn't want competitors to know Apple Watch ASPs. This is why it hides both units and revenue as best it can since those are the inputs to discovering ASP.
Smartwatch pricing was already under pressureConsider how the smartwatch market played out in 2013 and 2014, according to industry researcher The Smartwatch Group.
Source: The Smartwatch Group.
The smartwatch market is extremely young, but commoditization and pricing pressures began almost immediately, with ASP falling 16% before Apple entered the fray. A large portion of these devices were Android Wear devices like Samsung's Gear line and Motorola's Moto 360. Since they all share the same operating system platform, the hardware vendors end up competing on price. We've seen this play out countless times in other markets for consumer devices. No surprises there.
So if Android smartwatch ASPs are deteriorating, and Apple launches Apple Watch with a starting price of $350, the Mac maker is sending a very strong signal about how confident it is with its pricing power. Apple witnessed the bifurcation of the smartphone market, expressing no interest in participating in the low-end. Tim Cook famously said, "There's always a large junk part of the market. We're not in the junk business."
If Apple were to demonstrate that there is at least some demand for a $10,000 smartwatch, then it would be inviting competition into the only part of the market that it cares about. Apple's not too concerned if rivals eat each other alive in the low-end, so long as it can sell to premium customers in relative peace. Sure, the $10,000 Edition model isn't the most practical example here, but rivals would love to be selling smartwatches for even $500, which is approximately what I suspect Apple Watch ASP is.
Case in pointEarlier this year, Huawei unveiled its Huawei Watch at Mobile World Congress. It's a very nice looking Android Wear device, embracing a circular design like the highly acclaimed Moto 360. Not much has been known about the Huawei Watch -- until now.
Huawei Watch. Source: Huawei.
The Chinese company recently released detailed specs about its forthcoming wearable, which launches next month. Huawei Watch will have a 42mm face and feature a 1.4-inch AMOLED display at a resolution of 400 x 400. The device will be made out of stainless steel and the display will be protected by sapphire crystal. It comes in silver, black, or gold-plated. A lot of that probably sounds familiar.
Pre-order pricing was briefly spotted online as well before being taken down. Huawei Watch will price between $350 and $800. Not including the Edition models, that's squarely within Apple Watch territory of $350 to $1100. No matter what, rivals are going to at least attempt to compete in the premium smartwatch category.
Come on, Apple. You might as well just tell us how many Apple Watches you're selling. Your secret's safe with us.
The article Is This the Apple Watch Metric That Apple, Inc. Desperately Wants to Hide From Competitors? originally appeared on Fool.com.
Evan Niu, CFA owns shares of Apple. The Motley Fool owns 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.
Copyright 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.