Will Apple Inc. Compete Against Google Glass and Microsoft Corp.'s HoloLens?

Apple could eventually challenge Google , Microsoft , and Sony in the augmented reality, or AR, market, according to Piper Jaffray analyst Gene Munster. Munster believes Apple has dedicated a small team to exploring AR, which he claims could be "as profound a technology as the smartphone today."

Google Glass. Source: Wikimedia Commons, Dan Leveille.

Unfortunately, AR devices, which "enhance" reality with digital overlays, haven't gained mainstream acceptance yet. Google Glass, the best-known example, was sent back to the drawing board in January. Sony's SmartEyeglass, which is bulkier than Glass and has a wired controller, is designed for niche enterprise users. Microsoft's HoloLens, which combines aspects of virtual reality, or VR, and AR, looks more promising, but it's unclear when it will arrive.

Should Apple develop an AR device?This isn't the first rumor of Apple developing an AR device. In 2011, Apple was reportedly exploring adding AR to Apple Maps. In 2013, Apple patented an AR system for mobile devices that superimposes information on real-world objects, similar to Glass or Nokia's City Lens app. In 2014, Apple patented a transparent display for that system, suggesting an AR headset was in the pipeline.

Munster said he believes "Apple has the unique ability to combine the technology of augmented reality with attractive fashion and design." Apple certainly has a lot of high-fashion talent in its ranks, including former Burberry CEO Angela Ahrendts, former Yves Saint Laurent CEO Paul Deneve, and former TAG Heuer sales director Patrick Pruniaux. But that doesn't necessarily mean "Apple Glass" will fare any better than Google Glass.

Last year, Google partnered with fashion icon Diane von Furstenberg to launch designer frames for Glass. The frames made Glass prettier and pricier, but they didn't address its main problem -- the protruding camera that caused privacy concerns and led to public bans on the device. Last April, an Adweek survey found that 72% of Americans wouldn't wear Glass due to privacy concerns.

Therefore, Apple might make Glass look sleeker, but the primary concern about wearable spy cameras won't simply fade away.

Learning from Glass' mistakesMicrosoft unveiled a prototype of HoloLens, a much larger AR headset, in January. Unlike Glass, HoloLens superimposes 3D VR environments on top of real ones. For example, a user can play a holographic game of Minecraft on a coffee table, or answer Skype calls on an AR display. An auto mechanic can provide remote assistance in fixing a car through the camera, simply by drawing directions on the user's display.

Microsoft's HoloLens. Source: Microsoft.

In short, Microsoft demonstrated how HoloLens could be useful in everyday situations. By comparison, Google initially promoted Glass' hands-free video recording capabilities, which can also be easily achieved with a GoProcamera. Google eventually promoted Glass for enterprise uses through its "Glass at Work" program, but that initiative only attracted a handful of small partners.

Google has since invested heavily in Magic Leap, an AR start-up that superimposes virtual objects over real environments. It's unclear if its features will be integrated into the next version of Glass, but if they are, the device could be comparable to HoloLens.

If Apple launches an AR headset, it will need to make several tough choices. Will it be a high-fashion device, an enterprise/remote assistance system, or a gaming and media consumption headset?

One step at a timeApple might have to answer those questions one day, but the AR market is still tiny. Research firm MarketsandMarkets estimates the entire AR market, which is worth nearly nothing today, could be worth $660 million by 2018. But that's a drop in the pond for Apple, which is expected to generate $226 billionin revenue this year.

Moreover, Apple doesn't need to launch an AR headset to gain a foothold in the AR market. It can use its AR patents to enhance Apple Maps and eliminate the need for third-party AR camera apps. Doing so would form a firm foundation for any wearable AR devices that Apple might release in the future.

The article Will Apple Inc. Compete Against Google Glass and Microsoft Corp.'s HoloLens? originally appeared on Fool.com.

Leo Sun owns shares of Apple. The Motley Fool recommends Apple, Google (A shares), Google (C shares), and GoPro. The Motley Fool owns shares of Apple, BURBERRY GROUP PLC S/ADR, Google (A shares), and Google (C shares). 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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