By Cyrus Sanati
FORTUNE -- Apple's latest product launch party was a real dud, but it could have been a lot worse if it had launched a line of so-called smartwatches. Apple enthusiasts had expected the company to counter recent smartwatch offerings from the likes of Samsung and Nissan by unveiling its own electronic wrist device at Apple's "Special Event" in Silicon Valley Tuesday, but the so-called iWatch, as the tech media has named the mythical device, was a no-show.
Investors and Apple consumers should see this as a good thing. Apple has no business delving into the crowded and low-margin cellular accessories business, especially for a device as ridiculous as a smartwatch. The company and its shareholders would be better served if it spent its time and money developing new markets for its current products and working on the next "big" thing that will actually move the needle for the company in terms of revenue and profit.
Apple's latest product launch party was pretty sad. Gone were the days when Apple was able to extract legitimate "oohs and aahs" from its hand-picked audience of nerds and Apple fanboys. The newly unveiled iPhone 5C is made from plastic instead of metal and is available in a bunch of loud colors -- snore. Analysts aren't excited with the 5C, either. It was hoped this "cheaper" iPhone would help bring in new customers into its ecosystem from the emerging markets, but it is hard to see how that can happen given that the 5C's unsubsidized contract-free price in the U.S. with 32mb of onboard storage (a minimum for today's active user) will cost a shocking $649. That's expensive for the U.S. market, so you can forget about this phone appealing to those in the emerging and international markets where consumers pay a premium on top of the unsubsidized price.
Beyond the iPhone 5C there wasn't much else announced that we didn't already know. So it is pretty safe to say that innovation at Apple is dead, or, at the very least, hibernating. That's sad, but all is not lost. Apple is still a cash-generating machine with a beloved product line. The company has the luxury to coast a bit and regroup before it comes back around and hits the market with another game-changing product.
The absolute worst thing Apple could do now would be to set off on a path of cash destruction and brand dilution by launching a bunch of terrible products that would tarnish its image. Enter the "iWatch"-- the Apple smartwatch that the company has supposedly been working on for over a year or so, that is, of course, if you believe the tech press. Apple (AAPL) has never said anything about launching such a device nor has it leaked any information out to the public.
So what exactly is a smartwatch? Well, there are many interpretations, but generally it can be defined as an electronic device you wear on your wrist that connects to your smartphone via Bluetooth to deliver notifications and such without having to look at your phone. The watch can alert you if you have an incoming call, display text messages, and could possibly control some apps and the phone's music player, as well. It can probably tell you the time, too.
To be sure, the smartwatch concept is not new and while it has had limited success in the athletic market, it has failed consistently to emerge as a viable product offering for the mass market. Why? That's easy -- it's absurd. The amount of information that one can get from a watch screen that is one to two square inches is pretty limited. Talking into a watch, a la Dick Tracy, is just weird, and typing into one is a near impossibility. Meanwhile, speech-to-text software is still rough, so having the watch deliver a text message can be super-frustrating.
Nonetheless, rumors have floated around for over a year that Apple was developing a smartwatch to pair with its next generation iPhone. There was talk that the company had over 100 engineers working on such a device and that it had hired away developers who have worked on other smartwatches, such as those for Nike (NKE).
It is hard to see what if anything innovative Apple can bring to a smartwatch in terms of form and function. There is just so much that can be communicated via Bluetooth, so the company's options are limited. Pricing such a device is also tricky. There are smartwatches out there going for as low as $25 and others going for hundreds. They all pretty much do the same things -- the only difference is the styling.
This is where it gets complicated. Since one wears the device it ceases to just be another electronic gadget and instead becomes a fashion accessory. A smartwatch worn outside of the gym would need to not only come in different colors but totally different styles as well. This means if Apple were to be truly successful in serving the watch market, it would need to offer dozens of different designs and sizes to fit the variegated tastes of their disparate consumer base.
Apple doesn't want to be in the fashion business. It prefers to mass-market quality items that pretty much all look the same to keep its inventory channels clear. Sure, Apple has offered a case or a "bumper" now and then, but those were cheap to make and served as a template for the third-party market as to what was and what wasn't acceptable. But if it were to develop a smartwatch, the company would be in putting itself in direct competition with thousands of companies all vying for dominance in the massive and disjointed mobile accessories market -- a place it has (rightly) avoided ever since the first iPhone came out.
For example, carmaker Nissan announced that it had created a smartwatch this week at the Frankfurt Motor Show that would link to its cars via Bluetooth. The watch would link to the car track performance data like speed. The styling of the watch is sleek and admittedly has a "cool" look to it. Would my mom wear one? No. Would someone who loves racing in their Nissan like one? Maybe. Is that a market Apple wants to be in? Absolutely not. A smartwatch is super-personal, and there are simply too many variations and too few barriers to entry -- I mean, Nissan just made one.
But earlier this year Samsung, Apple's mobile phone archrival, said it was developing its own smartwatch. Pretty much every analyst and tech watcher interpreted the news from Samsung as a counter to the rumors that Apple was developing its own smartwatch. Last week, the company revealed its new Galaxy Gear line of smartwatches to go with its top-end Galaxy phones, which compete directly with the iPhone in price and feature. The timing of the announcement wasn't seen as a coincidence -- Samsung desperately and pathetically tries to one-up Apple at every turn. Unfortunately for Samsung, its smartwatch hasn't been well received.
It must have come as quite a shock to Samsung executives when Apple didn't "unveil" its own smartwatch yesterday. Technology experts speculated that the iWatch was a no-show because Apple didn't want it to steal the spotlight away from the new iPhone models. That could be true, but maybe Tim Cook and the Apple team are far more Machiavellian then we give them credit for. Maybe, just maybe, there isn't a watch at all. Think about it, there hasn't been one, not one, leaked photo of the iWatch, nor have there been any reports from China that Apple was building a watch of any kind. Could it be that the iWatch is as real as the much fabled iTelevision the company has supposedly "been on the brink" of unveiling for the last three years now?
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