Apple tests smartwatch market with quiet debut of Cook's first product

By Reuters

Apr 23, 2015 07:16 AM EDT

The Apple Watch will launch with a whisper rather than a bang on Friday, an unusual start for the company that may reflect early uncertainty about demand for Apple Inc boss Tim Cook's first new product.

The company has not revealed how many orders it has received in the run-up to the April 24 launch, a contrast to previous launches of iPhones and iPads. And Apple stores will not have any watches to sell on Friday, even though some luxury shops around the world will.

Apple was unsure whether the watch would create the lines snaking around stores that the company has historically seen with its iPhones, said Gene Munster, an analyst at Piper Jaffray.

"The smaller launch can allow them to see how it goes and it does remove some of the line expectation and risk," Munster said. "If they did it the old way and the lines weren't good, that's a bit of a problem."

Demand turned out better than expected, according to Munster, who predicts more than 2 million watches will be sold in the quarter ending in June. FBR Capital Markets senior analyst Daniel Ives raised his 2015 estimate to 20 million from 17 million, based in part on online order backlogs.

"There was a question over whether the trajectory and demand for wearables in the Apple ecosystem was there and real," said Ives. "But it's a resounding yes." Now Apple faces the question of whether confused consumers will swamp Apple Stores on Friday.

"A lot of consumers are going to go to the store on Friday trying to buy a watch," he said.

Apple itself said that some customers will get watches faster than promised. "Our team is working to fill orders as quickly as possible based on the available supply and the order in which they were received," Apple said in a statement on Wednesday.

Apple has settled for the simplicity of online orders in the face of difficult logistics for watches: there are 38 variations it would need to keep in stock, when accounting for the various sizes, styles and bands, with prices ranging from $349 for the Sport version to $10,000 and more for the gold Edition.

In fact, the only watches on sale on Friday will be at a handful of upscale boutiques and department stores that Apple courted to help position the watch as a fashion item.

The Corner in Berlin, Maxfield in Los Angeles and Dover Street Market in Tokyo and London all say on their websites that they will have watches in store on April 24. Maxfield will open two hours earlier and is preparing for crowds.

Apple will likely use preorders to perfect the consumer experience by giving watch customers more attention in stores and adding apps in time for the holiday season, said Shannon Cross, analyst at Cross Research.

"They're looking at this from a long-term standpoint and want to make sure it's successful out of the box," Cross said. "A lot of smartwatches out there end up being shelfware."

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