Apple’s Watch Outpaced the iPhone in First Year

As the Apple Watch marks its first anniversary on Sunday, two days before Apple’s quarterly earnings announcement, the product’s fate is critical to the company. It is Apple’s first all-new product since the iPad and a test of its ability to innovate under Chief Executive Tim Cook, when sales of iPhones are slowing.

​So far, the numbers appear solid. Apple doesn’t disclose sales, but analysts estimate about 12 million Watches were sold in year one. By comparison, Apple sold roughly six million iPhones in its first year. As a new entrant, the Watch accounted for about 61% of global smartwatch sales last year. The Watch has shortcomings. It is slow, with an underpowered processor that is throttled at times to extend the device’s battery life. It lacks mobile and Global Positioning System connections, meaning it must be accompanied by an iPhone, limiting its usefulness as an independent device. The battery needs to be charged every day. Perhaps the biggest challenge is the Watch’s lack of a defining purpose. It does certain things well, such as activity tracking, mobile payments and notifications. But there is no task the Apple Watch handles that can’t be done by an iPhone or a less-expensive activity tracker.

Forrester Research analyst J.P. Gownder says the Watch isn’t useful enough. He expected more businesses to create apps like one from Starwood Hotel & Resorts Worldwide Inc. that lets customers check in, receive a room assignment and unlock a room door without stopping at the front desk. Mr. Gownder said Apple hadn’t done enough to build a broader ecosystem of services. “Apple needs to make it an indispensable thing,” he said.

Still, the Apple Watch has fans who use it daily. According to research firm Wristly, 93% of 1,150 Apple Watch owners in an online survey last week said they were “satisfied” or “very satisfied” with the device. The Watch’s early struggles in some ways echo the iPhone, now considered a groundbreaking product that accounts for two-thirds of Apple’s revenue.
The initial model didn’t run on the then-fastest wireless network, didn’t offer third-party apps and lacked basic functions such as copying and pasting text. However, he remains bullish on the Watch. Mr. Grossman sees parallels with the first iPod, released in 2001. Many consumers complained that the initial music player was too expensive, too bulky and had limited storage. However, as Apple delivered hardware improvements and lowered the price, the iPod became a must-have device.

There are relatively easy fixes for some concerns. Apple is working on adding cell-network connectivity and a faster processor to its next-generation Watch, according to people familiar with the matter.

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