Apple Watch: An Overnight Multi-Billion Dollar Business -
Intriguing piece by analyst Carl Howe on Apple Watch:
I think I’ll save that analysis for another posting, but my belief is that the Apple Watch product line will become Apple’s most profitable product line ever, with gross margins exceeding 60 percent. Why? Because the core electronics modules in the expensive models are the same ones used in the Sport models, and they just don’t cost that much. And while adding Gold cases and designer bands add cost to the bill of materials, the costs are small compared to the price premiums paid for these products. Unlike in the consumer electronics business, I see no pressure for prices to fall and if anything manufacturing costs will, resulting in a very profitable business.
I think he’s made some smart guesses as to the product mix between Sport/Watch/Edition, but if I had to adjust his numbers at all, I’d move the number of Edition models Apple will sell slightly up. In Howe’s estimate, Sport is outselling Edition by about 45-to-1. But if it’s more like 30-to-1, the Edition line would account for as much or more total revenue, and certainly more profit. I’m guessing at an average selling price of around $400 for Sport (more 42 mm than 38 mm, plus lots of extra bands). But let’s say it’s as high as $425. At that ASP, 30 unit sales equals $12,750 in revenue. Given the prices of the Edition line (42 mm with Sport band costs $12,000; the ones with leather straps are $15-17,000), I’d imagine the ASP for Edition will be at least $12,750.
(Via Daring Fireball.)
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