Carl Howe: Apple Watch – an overnight multi-billion dollar business

“The Apple Watch went on sale for pre-orders on April 10, 2015, and the Apple Store tells us that delivery dates for all orders now stretch into summer and beyond. We know that the initial production run of Apple Watch has sold out; what we don’t know is how many Apple Watches that represents,” Carl Howe, Think Big Academy principal, blogs. “I’ve built a simple model that predicts that the initial run of watches was more than 3 million units and will yield Apple Watch revenues of over $2 billion for the first two weeks of sales.”

“The model suggests that while Sport Watch will lead sales in volume, selling 1.8 million units through May 8, Apple Watch will actually lead in revenue during that period, garnering about $900 million versus Sport’s $675 million,” Howe writes. “I also believe that Apple’s decision to introduce the Edition will be validated by $500 million in sales on only 40,000 units.”

“While I believe that these figures will be considerably below the number of pre-orders for Apple Watch, I believe Apple did this for an important reason,” Howe writes. “Apple is offering 38 different models of Apple Watch and it has no order history to go on. Instead of guessing at the right mix of models to manufacture, I believe that while Apple has manufactured a large number of Apple Watch electronics modules, it will perform the final assembly of actual products—the unique combinations of module, case, and band—to order. This approach will allow it to keep inventory costs low and satisfy as many consumers as possible.”

Much more, including Origami lobsters, in the full article – A Must Readhere.

MacDailyNews Take: Carl Howe. One of the world’s best Apple analysts. There’s much goodness in the full article. Dig in!


  1. Great great article, though I have one head scratcher.

    “Every product should make money.”

    It looks like Carl Howe considers a product to be a physical device (ipod, iphone, Mac, watch, whatever) but does that extend to the software? Is the OS a “product” or something attached to a product, or a service or or or????

      1. Trolling? You think my comment is trolling? You do have a right to your opinion of course but I personally think it’s a good topic of conversation, and certainly not one conducive to a flame festival.

        Now to reply to your comments on the topic of the article….
        Oh wait, you didn’t make any, so I guess that’s that.

    1. I believe he was thinking about the product as the hardware and associated software, The Mac is non-functional without the software. It’s as much a part of the product as they hardware. That’s why every Mac comes with software preinstalled.

      Apple doesn’t make money directly off of software upgrades that they give away, but doing that makes the product better and ultimately leads to more sales. You could say that Apple product you purchase today will actually improve in functionality over time. You can’t really say that about your vacuum cleaner or washing machine, at least not yet.

      I don’t know what arrangement Apple has with automobile manufacturers for CarPlay. Maybe they give it away. But if it leads to purchasing more iPhones, which it most certainly does, then it also makes money for Apple in a more indirect way.

      1. Yes, I tend to lean towards your assessment of the situation as well, at least when it comes to the operating system. I wonder how it pans out for (optional) the software that Apple sells. No doubt it does make money for them, though I don’t know if the margins as as high as Carl Howe reports it for the other products.

        I do love what you say about the Apple product improving over time thanks to software upgrades, that’s a big plus.

        Thanks for sharing your sentiments.

    2. I see your point, but…

      You can’t use or buy the OS independent of the hardware. In this way, the OS is an appendage of the product (El Macintosh). That is, the combination of the hardware and software ARE the product…

      …and that magical combination of Apple Hardware and software is why we are all here, why we delight in computing – and most importantly – why we don’t suffer from the mental condition commonly referred to as “Microsoft Sufferers”.

      1. Ah reminds of me the days when you used to be able to buy the Mac Operating system.
        So what’s your slant on the software that Apple sells independently of the operating system. Thing that falls into Carl Howe’s idea of a product?

    3. Everything Apple does that is not a “physical” product is a “value-added service.” For example, the iTunes Store makes money, but that is NOT its primary purpose. The primary purpose is to enhance the customer’s experience (and thereby promote loyalty), so that they will buy more Apple hardware products in the future. Same with Apple Pay, iLife (and other Apple apps), OS development (for mobile and Mac), Siri, iCloud, etc…

  2. So lets invent flopgate say the pundits, idiot analosts and sam’s scum …
    Then, come earnings on April 27th, Apple will stun the idiots with astronomical numbers that will still not digest till Xmas, when the demand will be astronomical and new surprises will show them all up for the true ignoramuses that they are…

    Before you know it Apple will be at $185.


    1. What? The analysts never seem stunned, they shake it off like the three stooges being hit on the head, then continue on with their moronic ways. But I guess some of them do make money pretending, so those aren’t technically morons, only liars and thieves or sycophants, take your pick.

    1. The share price has nothing to do with the income Apple gains from its products. We all know Apple’s share price is being manipulated. Apple can post the best profits any company has ever made and the price will still drop. So your point is…?

      1. Yes.
        Traders profits are made on trades. How dissapointing it is to hold. So create a reason to vary the value and then trade millions every day.
        Until we have a form of Tobin tax on the useless trading of shares for buy/sell commission generation even the most valuable stocks will continue to suffer from useless trading activity.

  3. That is REALLY good stuff… 🙂

    I especially enjoyed reading it, because I’ve posted several times that the Apple Watch stockpile on April 10 does NOT really matter, while the lesser “analysts” have been whining about “insufficient supply” of Apple Watch as a sign of failure, Why? Because Apple would continue to produce more between April 10 and April 24 (and beyond). The ramp up in production (AFTER April 10) targets ACTUAL orders, and that’s where most units shipped before the end of June will come from (not from any stockpile that existed before April 10).

    Also, I did not consider that Apple could stockpile the internal “brains” of the watch, which are identical for each size, and then assemble ALL watches to fulfill on actual orders. That means zero inventory of completed watches that are not already sold. Brilliant!

    The bottom line is that Apple sells every Apple Watch produced, even before it leaves the factory. It does not matter when supply catches up with demand; the limiting factor is NOT how many Apple can sell per month, it’s how many Apple can produce per month. Since potential Apple Watch customers are not going to buy some alternative product while waiting, there are no “lost sales.” When supply eventually catches up with demand, Apple’s total unit sales are not affected.

    So, if this fake “supplygate” crisis manufactured by the media causes AAPL to dip significantly, it would be an excellent time to BUY. It would also be an opportunity for Apple to do some significant buybacks. The typical “experts” will soon figure out how clueless they are, and AAPL will rocket to new heights on the revenue and profit machine that Apple Watch becomes.

  4. I think the limiting factor for cases will be the production rate of the CNC machines that are required to turn out the watch unibody.
    Apple could switch machines from iPhone production to watch production but only Apple have the volume of machines required for this task.

    Swiss watch makers are dealing in batch quantities several orders of magnitude lower than Apple. – thats the truely impressive feat in precision manufacture.

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