The Apple Watch seems to be selling well so far, according to most estimates. Cowen and Company on Monday estimated Apple’s opening weekend Apple Watch sales may amount to 1 million units, AppleInsider reports, which puts it in line with a recent study from Slice Intelligence that also estimated opening-weekend sales of 1 million devices. However, Cowen went a step further and discovered Apple’s secret to making interested customers into buyers.
Cowen and Company talked to dozens of salespeople from all of Apple’s retail stores in the San Francisco Bay Area over the weekend and discovered that 85% to 90% of all the customers who tried on an Apple Watch in stores starting with Friday were turned into buyers.
Analyst Timothy Arcuri estimates Apple will sell some three million Apple Watch units in the June quarter, and up to seven million in the following period. In the first 12 months, Apple could sell 31 million units, according to Arcuri, which would make it Apple’s best product when it comes to first-year performance.
The initial average selling price for the Apple Watch is seen being around $449 and is expected to drop to $422 in the following quarter. The entry-level price for the watch is $349/$399 for the Apple Watch Sport model.
It's almost time.Apple Watchpre-orders begin at midnight tonight, Pacific time (that's 3 a.m. ET Friday), with theWatch arriving in storesand from the delivery man on April 24. It also means that on Monday morning, April 27, a lot of early adopters -- having spent the weekend figuring out how their new wearable works -- will stroll into the office without waiting for approval from IT. The good news: Given Apple's history and the fact that it kick-started the BYOD movement with the iPhone and iPad, embracing the Apple Watch shouldn't be a big deal. Sure, early reviewers complained this week that it can be confusing and sluggish -- even as they acknowledged that itrepresents a paradigm shiftin how people relate to technology. But that's how people relate to the Watch, not how it relates to the workplace. Though there's been some concern about yet another device walking into the workplace -- network issues, data privacy concerns -- there's nothing the Watch can do that an iPhone doesn't already do. Its raison d'etre is to streamline specific activities without requiring you to grab your phone. (Nervous IT support types should already be familiar with Apple security in iOS devices, which can befound here.) As such, it's the appsthat will be crucial to success. According to acompany memo sent by Apple CEO Tim Cook, more than 1,000 Apple Watch-compatible apps were submitted in the first four days after Apple started accepting the apps. And, according to Cook, the "rate of submissions has only been climbing since then." Like the iPhone, there will be an app for nearly every need and every instance, and each Watch will be a personalized extension of its wearer. There are already a few features and apps that will have a major affect on those that live on their mobile devices. For instance,customizable Watch faceswill help play an important role in displaying relevant information at a glance, including upcoming meetings, events, weather info and other data. For people who constantly check their phones, the Watch will be a major win: It's much easier to glance at your wrist than pull a phone out of your pocket. I found this out first-hand after spending five months with the Microsoft Band, which offers phone notifications, but lacks the sophistication and details that can be shown on the Watch's much larger Retina display. Some companies are responding by changing how information is delivered. The New York Times has said it plans to offer one-sentence articles, succinctly summing up news so that the marrow of a story can be digested on the go. For those that spend a lot of time staring at their phone, this is the beginning of a trend that accentuates what the Watch is great for: important data in bite-size bits.For businesses, there are already a variety of apps that deliver enterprise-worthy functionality: collaboration apps such as Slack and Redbooth will make it easier for groups to stay on top of things to do. Invoice2Go lets you track time spent on a site visit, using geofencing to start and stop the timeclock based on when you enter and leave the geofence. And if your company uses Salesforce, there a few apps on deck that should give you at-a-glance information on key metrics, alongside Salesforce Wear, an SDK that allows Salesforce customers to create their own watch-capable apps. For road-warriors, the Watch will be even more useful. Apps like the one used by Starwood hotels and resorts will assign you a room so you can bypass the front desk and unlock your door with a wave of your wrist. Airline apps will store and display relevant flight and boarding data (as well as scanable barcodes that can be used to quickly get by security without fumbling for paperwork). If you travel for work, these kinds of changes will save you a lot of time.
That's true, too, when you're away from home and don't know exactly where you're going. Not only are you a tourist but youlook like a tourist, too, fumbling for directions on your phone. While the iPhone's map applications and GPS are extremely useful in navigating to destinations, the Watch will offer more discreet directions along the way to your destination. Apple's Maps and third-party Watch apps like City Mapper both offer haptic feedback to directions in the form of taps on your wrist. This silent information lets you know exactly where you're going in strange cities, without the hassle of staring at your phone's screen. The City Mapper app even features mass transit data and will tap your wrist when it is time to get off at train, subway and bus stops without making it obvious. If walking isn't your thing, the Uber app -- it was highlighted on stage during last month's Apple event -- allows you to book a car using your current location, also providing you information and a picture of your ride and driver, right on the wrist. And of course, you'll be able to pay for things using Apple Pay with a flick of the wrist. The point is, all kinds of data will be available at a glance, and all of it can be personalized to your specific needs. Better yet, Apple execs are already looking beyond the upcoming launch and have promised that Watch software will improve, both in the short term and, more importantly, over the long haul with the introduction of fully native Apple Watch apps. Because the Watch is aimed at the millions of people already using Apple products, especially the iPhone, it should just slip right into existing workflows and equipment, like a puzzle piece nobody knew was missing. Support for Handoff and Continuity is especially important: You can begin a phone call on the Watch and push it to the Phone with a button tap; start reading an email on the Watch, finish it on your Mac or iPhone. The level of sophisticated integration with products you're already using -- and with iOS 8's security -- is a major plus. If Apple's reputation for easy-to-use first-generation products is any indicator, many new Watch owners should be able to get by with only a minimal amount of formal training. Most of it can be figured out by poking around the Watch and its apps themselves or by watching some of the Apple walk through videos -- which is, no doubt, just what a lot of Watch newbies will be doing in a couple of weeks. So when they do walk into the office on the 27th, they can show you just what the Watch can do.
The Apple Watch Sport model is the least expensive, starting at $349.
Michael deAgonia, a contributing writer for Computerworld, is a computer consultant and technology geek who has been working on computers since 1993, with an emphasis on Macs, OS X, and iOS.
It’s been a short while since Microsoft (NASDAQ:MSFT) decided to remove the “Nokia” name from its smartphone business. But the Redmond-based tech giant shows no intention of slowing down, as it announces, and prepares for, the launch of the first smartphone that will drop the Finnish phone company’s title in favor of naming the series "Microsoft Lumia."
In the past, Microsoft has struggled to find a place in the market for its Windows Phone operating system, which, according to third-party analysts, is used in only 2.5% of mobile devices across the world. Google Inc.’s (NASDAQ:GOOG) Android leads comfortably in first place with an 85% share, followed by the many millions of iPhones running Apples Inc.’s (NASDAQ:AAPL) proprietary iOS.
Most of the phones released by Microsoft have only found a place in developing markets, where people just recently got a taste of what smartphones have to offer – their main appeal being the colorful covers and looks.
In more mature markets, Microsoft hasn’t made a significant impact, with brands like Apple and Samsung Elect Ltd (F) (OTCMKTS:SSNLF) taking the lion’s share. Microsoft’s smartphone business is also under threat from Chinese competitors in emerging markets, which offer decent quality phones and impressive specifications at a significantly lower price.
For now, it seems like Microsoft intends to stick to its previous strategy, which could be considered a questionable move by some. The company announced, “Microsoft is delivering the power of everyday mobile technology to everyone. Come back on November 11, to find out more!”
While the wait till next Tuesday is certainly on, sources say that Microsoft’s new phone will be far from a game changer. As rumors have it, it will have a 5-inch display of around 960 x 540, coming out to be an unimpressive 280 pixels per inch. The core will be quite mediocre as well, with a 1.2 GHz Snapdragon 200 Chipset and 1GB RAM. The phone will feature 8GB internal memory and a 1900 mAh battery. Even the camera isn’t much to look at, with a 5 megapixel primary and VGA secondary front snapper.
The one thing that the phone does have going for it is its price, which is expected to be around $100-150 off contract. However, unless Microsoft makes some serious upgrades to the Windows Phone operating system, the new phone may not do very well.
Once again, Microsoft gambles with a low-end device, which is strange considering that just last week, two Chinese smartphone manufacturers – Xiaomi Inc. and Lenovo Group Limited (ADR) (LNVGY) – traded places as the third and fourth largest manufacturers in the world.
Lenovo and Xiaomi specialize in devices that offer much better specs than the phone Microsoft intends to offer. The two pose a serious threat to the tech giant’s business in the emerging markets. And as it is, Samsung and Apple’s premiums lines are often the phones of choice for many in the US, UK, and Europe.
While the release of Microsoft’s new phone doesn’t make earlier versions of the Lumia series such as the 1020, 1520, and 920 irrelevant, these old phones remain the best Microsoft has to offer to mature markets, and they haven’t been updated in a while. In the meantime, Samsung and Apple have been busy updating their devices year after year.
Microsoft has had a mixed experience with hardware. Consoles such as the Xbox and Xbox 360 performed extremely well, while the Xbox One (like some of its phones) was a bit of a disaster. The Surface tablet initially started off slow, but sales have picked up 127% since the release of the Surface 3 Pro.
November 11 and the months following it will show how well Microsoft’s rebranding efforts pay off for its smartphone business.
Xiaomi Corp., the private company that sells the most smartphones in China, had been shrouded in mystery: It wasn't clear how it could make money by selling top-of-the-line productsat rock-bottom prices. Xiaomi hasrevealedits 2013 financials, and they show a handsome profit, which means smartphones from Apple, Samsung and even LG and HTC may be grossly overpriced.
Xiaomi's flagship phone, the Mi4, sells for a minimum of $327. Its specifications are largely the same as, say, the Samsung Galaxy S5, which costs at least $150 more. The Chinese makerdoesn't skimpon component quality to drive down the price: It uses the same Sony battery and optical sensors, Qualcomm processor, Wi-Fi and audio chip, Samsung RAM chip and parts as other premium smartphones. Xiaomi phones don't look or feel cheap, though their design is minimalistic. TheMi interface, with its highly intuitive, native-feeling and iOS-like Android flavor, is an improvement on Google's version of the operating system and doesn't suffer from the bloatware inflicted on users by other phone manufacturers.
It's a good piece of equipment that reviewerscan't fault. It could compete on its own merits, not just on price, so why sell it cheaply?
One possible answer is that Xiaomi sees the phones as just delivery devices for software, which the company also develops.
"We are an Internet and a software company much more than a hardware company," Hugo Barra, Xiaomi's vice president for global operations,saidat a recent tech conference.
Barra repeats this disorienting mantraevery chance he gets, but the financial data, published in The Wall Street Journal, show it either reflects wishful thinking or plans for a distant future. The company made 94 percent of its $4.3 billion in revenue from selling mobile phones. Even Apple, where hardware accounts for 90 percent of sales, is more of an "Internet and a software company."
Xiaomi is a late entrant to the market, so it has avoided the hassle of going head-to-head with established players in its price category. Instead, it has chosen to keep down both costs and margins, and to concentrate on the product.
The company is spending very little on conventional marketing. Instead, it providesforumsand communicates with userson social networks. In 2013, it only spent 3.2 percent of revenue on sales and marketing. Apple's sales and marketing efforts consume twice as big a share of revenue, which is 40 times greater than Xiaomi's. Samsung's selling and marketing expenses account for 16.3 percent of sales.
Even though it saves on everything except quality parts, Xiaomi still has a gross margin only half as high as Apple's or Samsung's. It did, however, make a net profit of $566 million last year, 12.8 percent of revenue. That's high: Samsung's net profit last year was 13.3 percent of revenue.
That may explain why Xiaomi is attempting to attract itslatest roundof financingat a higher valuationrelative to sales than Apple commands. The Chinese company may be more valuable than any other mobile phone manufacturer because its business model is a killer app. Xiaomi founder Lei Jundescribed it this way:
When I was with Kingsoft, I had the opportunity to work with Nokia and Motorola, 2 mobile phone giants of their time. One day, I pointed out to their R&D boss, some inadequacies. After that, they merely acknowledged my input, but never acted upon what I had said. So I thought to myself, if I make a phone, you can tell me anything you wish for it or what's wrong. If it is justifiable, we will work on it immediately. I'll give you an update every week and you may even see your wishes come true within a week.
In this era of marketing-driven business, "build it and they will come" isn't a popular approach. It is effective, however. When Xiaomi phones become more readily available in Europe and the U.S., there will be no reason to pay more for competing products whose specifications and build quality are practically the same. Chinese consumers have already reached this conclusion.
To contact the writer of this article: Leonid Bershidsky at lbershidsky@bloomberg.net.
To contact the editor responsible for this article: Max Berley at mberley@bloomberg.net
Apple blocks infected apps, but the illicit market is extensive
Apple can’t protect users if they download apps from third-party sources.
A new family of malware found in unauthorized mobile applications threatens Apple Inc. devices in China and other emerging markets, underscoring the risk of downloading apps for smartphones and tablets from third-party sources.
Apple AAPL, +0.29% told MarketWatch Thursday that it has blocked the infected apps, which include popular games such as Sims 3 and Angry Birds. However, the black market for pirated apps is extensive, and that makes it very difficult for the tech behemoth — or anyone for that matter — to keep a lid on it.
Third-party applications don’t pose as much of a threat in the U.S. and other Western countries where Apple users tend to be loyal to the Apple App Store. But it has become a problem in emerging markets, where incidents of malware originating from third-party sites tend to be much higher.
This is because Apple users in emerging markets try to save money by purchasing unlicensed apps, or seeking apps that do not follow Apple’s iOS protocol, said CyberSponse CEO Joe Loomis. Pirated versions of apps from the official Apple App Store are often available for free on third-party sites.
Quashing the malware problem is difficult, said Ryan Olson, intelligence director at cyber security company Palo Alto Networks PANW, +0.86%because anyone can upload apps to third-party sites. Some of those sites can be trusted, he said, while others host pirated material and are far less secure. It’s difficult for major tech companies like Apple and Google Inc.GOOGL, +0.02% to keep track of such sites.
Despite warning users about the dangers of downloading any files, including apps, from unaffiliated third-party sources, Olson said Apple and Google “can’t really stop” the spread of malware if users continue to download from unaffiliated sites.
“As always, we recommend that users download and install software from trusted sources,” an Apple spokesperson said in an email to MarketWatch on Thursday.
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All 467 of the Apple-compatible apps uploaded to the Chinese Maiyadi App Store from April 30 to June 11 were infected with a new type of malware dubbed WireLurker, according to Palo Alto Networks, which exposed China’s malware problem in a 30-page report published Wednesday night.
Those infected apps were downloaded tens of thousands of times from Maiyadi, a third-party site, by Apple users during a two-week test period earlier this year, Palo Alto Networks said.
Apple and other tech companies will try to shut these sites down, Loomis said, but doing so is difficult because sites that engage in piracy are usually based overseas.
In fact, nearly all cases of iPhone malware have derived from third-party app stores, particularly one known as Cydia, said Greg Martin, founder and chief tech officer of ThreatStream.
Cydia is a third-party app store run by SaurikIT that is targeted toward “jailbroken” phones, or those devices whose operating systems have been cracked into by users, often so that they can personalize and customize their iPhones and add their own software.
Cydia calls itself an “alternative” to the Apple App Store. However, jailbreaking violates Apple’s terms of service and voids the device’s warranty.
