Apple’s Tim Cook is Playing a Very Smart Game With Apple Watch

| Analysis

The scuttlebutt on the internet is that the Apple Watch isn't selling very well. Add to that the voices of some people who haven't taken a liking to the Apple Watch, and one might fall into the trap of thinking that it's a failure. But it isn't, and Apple's wise choice to not reveal sales numbers and roll it out slowly is turning out to be incredibly clever.

In a recent conversation with Mad Money host Jim Cramer, Tim Cook said:

We wanted to roll out [the Apple Watch] slowly. To put it in perspective, you can buy Apple Watch in 14,000 locations. You can buy the iPhone at over 200,000. And so we’re still in learning mode. We’re learning fairly quickly, though. We know a lot more than we did a year ago. And you’ll see the Apple Watch getting better and better.

This statement deserves some serious analysis. But first, let's set the stage by estimating the Apple Watch sales in its first year on the market. This isn't an exact science, but there are reasonable methods to use. Here's what I researched, with references, for Apple's four Fiscal quarters.

Apr-Jun '15 FQ3  ...
Jul-Sep '15 FQ4  total of 7 million FQ3 + Q4
Oct-Dec '15 FQ1  5.8 million (Holiday quarter)
Jan-Mar '16 FQ2  2.5 million (Wells Fargo Securities, Maynard Um)

That's 15+ million in the first year on the market. With an ASP of US$320 (Maynard Um), that's a total first fiscal year revenue of $4.9 billion. That's actually quite amazing by any standard.

Rather than try to compare that unit sales number to historical, ebullient but SWAG estimates by observers, I want to look at Mr. Cook's comment above and put it in context. That is, why would Apple both roll it out slowly and also decline to reveal sales numbers?

1. Deception. A major reason to keep the sales numbers a secret is to tread carefully in a brand new market, wristwatches. These have been in popular use for over a hundred years, and Apple wanted to make sure that it could avoid ruffling the competitive feathers of the experienced competition. If there were to be no widespread, authenticated reporting of Apple's success, Apple could essentially boil the competition's frog. The fact that the Apple Watch is generally being reported as a failure, thanks to the absence of sales reporting by Apple, is actually a plus when it comes to deception.

2. Getting the Tech Right. Before launch, Apple knew there would be new and risky features of the Apple Watch. The need to tether it to a paired iPhone 5 or later, the need to charge it fairly often, perhaps every night, and the fact that the display is generally off, needing a tap or arm gesture to light up the display could have so disappointed customers that the product might have totally failed in the market.

Image credit: Apple

Despite the marketing fanfare, Apple executives probably weren't sure how these limitations would be perceived by potential customers. Hence the apparent decision to roll it out slowly and track the acceptance.

If the acceptance were abysmal, Apple would have the liberty to quickly rethink the situation and make urgent improvements that would, perhaps, entail considerable engineering improvisation. Keeping sales numbers mum would avoid the appearance of initial failure.

If the acceptance were good, as it apparently has been, then a more considered, technically sound, well-paced approach could be taken to Apple Watch 2.0. That's where we think we are today.

3. The Luxury Angle and RIght Pricing. In a similar fashion, Apple had to get a feel for how customers felt about the price for the basic model. Set it too low, and customers might feel that it's not a device of technical heft and merit, in the Apple tradition. Set it too high, and sales would be poorer than desired. Once Apple had a feel for the sales of the first version, and production was in good order and producing economies of scale, the price was lowered in April, 2016.

The 38 and 42 mm Sport models were lowered from $349 and $399 to $299 and $349 respectively. Sales took off, soared 250 percent, and stayed higher. See: "Study: Apple Watch price drop goosed sales 250%, iPhone SE popular among switchers."


Keeping the Apple Watch sales a secret and rolling it out slowly allowed Apple to edge into an established market without either seeming to fail or unduly alarm the competition. Apple knew that in the absence of quantitative sales data, many doubters would declare the Apple Watch a failure, and that suited Apple fine so long as it met the company's own internal sales goals.

This strategy also bought Apple time to assess the market, collect usage data from the device itself, and evaluate customer feelings about the product. It allowed Apple to decide if it had an emerging winner and could safely move on to version 2.0 in 18 months. This bought Apple time to invest in the next generation technologies that the company knows will make it a long-term winner: health and fitness monitoring.

As with previous products like the iPod and the iPhone, this strategy allows Apple to take a confident, commanding technical lead before the competition can marshall resources and the will to catch up with Apple's enormous manufacturing capabilities.

And that's why Tim Cook said what he did. Roll out slowly. Learning mode. Learning quickly. And you’ll see the Apple Watch getting better and better.

Ever so smart.

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How many times are you going to try to spin this, John?
The watch is a failure whether they released sales figures or not. I don’t see anybody (in L.A.) wearing them and there is no “buzz” about it. It never “took off”. The fact Apple is being coy about sales further reinforces the notion they are hiding their displeasure at this turkey. Watch V2 had better be thinner, cheaper with autonomy from the Mothership and have at least a two day charge via true wireless charging.
Google just teamed up with FCA and the Chrysler Pacifica as their autonomous vehicle - tech marches on - and Apple is still fumbling around with a watch?? Nice.

John Martellaro

CudaBoy: Clarification: That Alphabet/Fiat Chrysler deal is to build prototypes. There are no plans (yet) to build a commercial vehicle. Although one can surmise that’s coming as well.

If they sell 100,000 of those cars at $40,000 each, [someday] that’s less than what Apple is estimated to have made in Apple Watch’s first year.  Plus, 75% of Apple Watch price is profit.  For cars?  About 10-15%.


You are basing the cost on an erroneous article. To say it costs $85 to make the watch is beyond laughable as nobody save a few people knows what the custom S1 chip costs let alone the taptic engine and digital crown. Labor costs would be more than usual at this level as well. Most estimates put it over $230 to make. And since there are no sales figures - it’s all moot as to if Apple made any money on the watch or not. I mention Google/FCA and Tesla as visionaries - neither one making any money at the moment but THAT is moot as well. If Apple ever gets a car program going (doubtful in this decade) we’ll see their stock tank as well before it surges with bandwagoners juicing it. Shoot, Apple could sell millions of E-bikes that integrate with iPhone/Watch if designed in Ives’ style of clean white carbon fiber/aluminum with batteries hidden in the frame - just wish they’d put out ANYTHING hip.

Graham McKay

Yes, I was one of those who ordered the Apple Watch as soon as it arrived. Even though I now couldn’t go back to a “dumb” watch my response to people asking about it is very similar to the response I used when the original iPad came out….. It won’t be suitable for everyone, it won’t be within everyone’s budget, it has a different usage paradigm to anything you’ve tried before, and the next model will improve on all those factors.

Us geeks tend to forget about that old phrase that is super important for non-tech savvy people: “It just works”. It doesn’t have to have every feature under the sun, but those it does have shouldn’t need to be constantly wrangled. This ties into the “soft” launch (public beta?) idea that 2.0 is more likely to “just work” than 1.0.

Lee Dronick

I could live without my Apple Watch, but I don’t want to. As Graham says it may not be suitable for everyone, but it is one of those things that you may not appreciate how it suits until you try it on


RMG’s Guide to Trolling

Step 1 - Make outrageous claim regardless of known facts (Watch is a failure)
Step 2 - Cite reasons that have absolutely no relevance (I don’t see anyone wearing them, there is no ‘buzz’, etc.)
Step 3 - State obvious facts that supposedly will fix the failure to enable being able to take credit when Apple does the obvious - “See? I said earlier this year that Apple needed to make Watch thinner (duh), independent from iPhone (duh), and longer battery life (duh). My predictions came TRUE!!”
Step 4 - Bring up company you work for and how great they are in doing things that provide 0 revenue today, implying that Apple ISN’T closer to releasing something into PRODUCTION instead of stupid pie-in-the-sky dreaming (BTW, how’s Google Glass doing nowadays?!?!? LMFAO.

Laughing at Watch when Google attempted (and EPIC FAILED) with Glasses?!?!? That’s hilarious!!



Whoops. Sorry.



Ugh. I forget how to put a link in!! LOL. But you get the picture!!


Lee Dronick

Ron I have a keyboard shortcut, several in fact, for BB Code. Typing uuu creates the url and /url inside of the brackets with space between the openning and closing code to paste in or enter the address. It is easier that when when on my iPad because I don’t have to get into the 3rd level keyboard.


Great idea, Lee. Although I would most likely forget the uuu shortcut!!


Failure or not I ❤️my Apple Watch. I use it every time I exercise—“hey Siri start out door run.” It get me to move and away from the computer by reminding me to stand—or is that reminds me when it’s time for a snack. I can read emails without having to look at my iPhone—what’s that dinging. I can get and follow directions—is one tap turn left and two taps right? And to top it all off, it actually tells time!

Anna Lamont

Just back from a week in London and my Apple watch made the visit ‘just work’. Used it for the Underground contactless in and out of stations, so tickets cost half the price ie same as Oyster card. No searching in my bag for a card or purse. Brilliant. Paid for lunches and just about everything with it as well. Reminded me of my flight being open for check in and when the gate opened for boarding. Made a real difference to my visit.

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