Apple Watch can be pre-ordered by users from April 10 through the website Apple Lossless Audio CODEC (ALAC),, and the first sales estimate told us that around 2 million units of the smart watch were pre-ordered worldwide, the figure being high for such a product, but this is easy to understand considering the very high interest in it.
Today we see new estimates regarding the initial round of sales for Apple Watch, and according to the analysts who calculated the initial orders, the Apple company would sell in the first two weeks of availability of the Apple Watch no less than 3 million units, 1.8 million being the Sport version, 1.2 million the stainless steel version, while the Edition version would generate only 40.000 sales.
[The electronics] 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.
Concidering as we speak about a smartwatch, analysts estimate that Apple would have a cost margin of 60% from the sale of each Apple Watch, so 40% of the asking price would actually represent the production and assembly costs of the watch, the remaining 60% going to cover the development, transport, promotion and other associated costs of the process of bringing it to the market.
Now if I ask you what these estimates are based on, well the analysts take into account the data provided by the estimates made by a US market analysis agency, surveys made by various other agencies in the US and other countries around the globe, and finally remaining the production estimates of the company Quanta, the combination of these three data sources providing the figure of 3 million units sold.
I believe that the 3 million Watches already in flight to consumers are simply Apple's seeding of the market prior to adjusting the final assembly mix to the actual order flow. I also believe that Apple and Quanta have probably gained enough experience at this point to begin ramping up production to more than 2 million units a month during May and June, resulting in another 4 million or so units to be shipped prior to the end of the second calendar quarter. I don't believe that this increased production will satisfy demand however, and I expect Apple Watches to be on back order through much of the summer.
Now we have to take into account the fact that these are only estimates and most of the data regarding the interest vis-a-vis Apple Watch refers only to the USA, so the situation in various other areas of the globe could be completely different from what what is happening on the American soil, this is also because the USA initially had no units in stock, while the rest of the 8 countries had units available for another 6 hours.
Now moving on to the amounts collected by Apple from the sale of the 3 million Apple Watches, analysts estimate that Apple would have collected no less than 2 billion dollars from its products, taking into account the mix presented previously and if this is true, then we are talking about the most successful launch made so far for any product of the American company.
While Apple uses premium materials for the Apple Watch, I believe that the costs of those materials are small compared to the price of even the least expensive Apple Sport Watch. By designing cases and bands that command prices aligned with jewelry instead of electronics, Apple has positioned its smartwatch products to earn exceptionally high margins compared to its smartphone and computer lines of business.
Given that Apple avoids providing data on the global sales of the Apple Watch until now, it remains to be seen if we will learn additional information next week, following the "launch" on Friday, but of course it is inappropriate to say launch since the senior vice president of Apple who manages the Apple Stores stated that the stores will not have units in stock.
