Nobody needs an Apple iWatch or anything like itMarch 20, 2013: 8:01 AM ET
Rumors that Apple and Samsung are working on wearable computers have reached a fever pitch. Truth is, consumers don't need or want such gadgets.
By Cyrus Sanati, contributor
FORTUNE -- Apple and Samsung's purported desire to create a "smart" watch to pair with their smartphones seems to be an incredibly dumb idea. The two, usually wise, companies would be making a grave mistake entering the low-margin cellular accessory market, where the competition is fierce and the barriers to entry are incredibly low. Furthermore, the utility of such a device seems questionable, likely appealing to a limited subset of consumers of unfashionable geeks and pudgy weekend warriors.
Rumors that Apple (AAPL) is developing a watch to pair with its iPhone have been swirling around for a while now. The word on the street in Silicon Valley is that the company has about 100 designers working on the product. Nevertheless, there has been little in the way of substantive proof to back up the assertions—no leaked photos, just questionable Photoshop mockups.
But that apparently isn't stopping Samsung, Apple's biggest rival in the handset market, from developing a smartwatch of its own to counter the phantom Apple product. Lee Young Hee, Samsung's chief executive, told Bloomberg News in an interview that his company has been, "preparing the watch product for so long," and that Samsung was, "working very hard to get ready for it."
It is unclear what a "smartwatch" by either Apple or Samsung will actually do, but it doesn't take the brainpower of 100 gifted Apple product engineers to figure it out. That's because there are already a bevy of "smartwatches" on the market and they pretty much all do the same thing.
The watch, usually inlaid in a tacky plastic band, connects to a smartphone via Bluetooth to deliver notifications from your phone to its tiny screen. The watch will alert you if you have an incoming call, by displaying the name and number of the contact, and some even display text messages. The watch can also control some apps and the phone's music player, as well. Oh, and they all can tell you the time, too.
The idea of a smartwatch isn't new. Microsoft (MSFT), the king of failed digital products, rolled out its "SPOT" smartwatch to much fanfare in 2002 only to see it crater a few years later. The SPOT used FM radio signals to deliver real-time information to the watch, such as weather, traffic and sports scores. It didn't link up with your phone. (Back then, phones were still dummies.)
"Imagine how handy it would be to have a travel alarm clock that, in addition to telling time very accurately and auto-adjusting to time-zones, could also wake you to your favorite WMA-encoded music, display information about road closures along your expected travel route, and deliver urgent messages," Bill Mitchell, general manager of the Microsoft Personal Objects Group, said about the SPOT watch in 2002.
Its hard not to laugh now. But having access to that information from your watch in 2002 would have been pretty cool. Today, though, you can get that info and much more via your smartphone. The SPOT service ran users $60 a month and required wearing a clunky watch–both negatives in the eyes of consumers. When wireless providers began offering cheap data plans wrapped with their phone, the SPOT watch was basically doomed.
Today's smartwatches are mere dummies compared to the SPOT watch as they depend on smartphones to feed it data, as opposed to FM broadcasts or a third-party source. So that means your supposed smartwatch would be pretty dumb without a smartphone in close proximity. There is little utility in wearing a clunky "watch" whose main purpose is to deliver messages that you can see by reaching in your pocket and looking at your phone. Trying to do anything remotely useful on the watch, like, say, sending a text message, is pretty much impossible, or at the very least, really annoying if done through text-to-speech software. Controlling your music remotely seems handy, but you can already do that with any decent pair of headphones these days. Squinting and fumbling with a screen that is at its maximum two inches by two inches is both limiting and distracting. Imagine having to remember to juice up your watch in addition to your phone, tablet and laptop. It all seems so unnecessary.
Indeed, it appears that the general public thinks so as well. When was the last time you saw a person sporting a smartwatch? Chances are you haven't. And it is not because the dummy smartwatch is something new. After the demise of SPOT, many of Microsoft's former partners, like watchmaker Fossil, attempted to make watches that paired with smartphones under the Sony Ericsson (SNE) and Abacus brands. The watches were actually quite stylish and weren't as ugly as their predecessors, mainly because they looked like normal analogue watches. What made them "smart" was an electronic strip at the bottom that displayed data in a ticker-tape fashion.
Recently, a whole new generation of smartwatches has hit the market, some with pretty good (but still practically useless) links to devices running Google's (GOOG) Android and Apple's iOS operating systems. The InPulse smartwatch by Allerta hit the scene a couple years ago targeting Blackberry (RIMM) users, which, I guess, seemed like a good idea at the time. The founders later went on to social begging site Kickstarter to fund a new watch, Pebble, which connects to both Android and iOS devices. The Pebble, which is big and comes in an array of colors, goes for $150 and just started shipping (to mixed reviews). Fossil continued to beat its head against the wall, this time under the moniker MetaWatch, which are an array of Bluetooth-connected watches for Android. Sony, which dropped the Ericsson name last year, came out with a couple of sleek watches in 2012 (that pretty much look the same), the LiveView, and cleverly named Smartwatch. Both are made for Android phones and are pretty cheap – the LiveView goes for under $25 on Amazon (AMZN).
At the Consumer Electronics Show in Las Vegas this year there were a number of other smartwatches up for grabs, notably: the simple Cookoo, the pricy i'm Watch, the retro Martian, the sporty WearIT and the elegant Leikr. You might be wondering why there are so many of these things? Well, that's because the watch is an extremely personal item. While the market for smartwatches will probably remain quite small given its limitations, consumers still want an array of choice to reflect their lifestyle (trendy vs sporty vs classic) as well as their fashion sense (nerdy hipster vs nerdy nerd, for example).
The one place where smartwatches may have a future is in the fitness space. The market for fitness watches is pretty much locked up by a few big names at the moment including Garmin (GRMN) and Timex. Neither has made a dedicated smartwatch, yet, so there is an opening for a strong alternative. Fashion and design here take a backseat to function, so people won't think you are weird for having a chunky screen on your wrist. Motorola MotoActv is a fitness centric smartwatch and could become very popular with hard-core athletes, but it is doubtful if those weekend warriors will wear their smartwatch when they go to work the next day. Nike's (NKE) Fuelband motion tracker and watch is another example that has seemed to take off, in part because it is so inconspicuous on the wrist. (Note that the much-talked-about Jawbone UP is not a watch at all...)
This fashion and lifestyle issue is a big problem for both Apple and Samsung. Knowing how Apple works, if it does launch an "iWatch," it will probably be just one watch that comes in a variety of colors. The unimaginative Samsung will most likely just copy whatever Apple does to the letter. That means that both products, which will probably have the same features as all those watches mentioned above, will appeal to a narrow subset of consumers who really dig its design and who believe it will fit their style. Both are tall orders–something that even the mighty Apple, will have a hard time trying to deliver.