Tuesday, March 17, 2015

Why the Apple Watch Exists

By Holman W. Jenkins Jr.

Though Tim Cook’s rhetoric sometimes obscures the fact, Apple is a business, and for once the business-page superlatives were not overdone. In the fourth quarter of last year, Apple sold nearly 75 million iPhones at a profit margin of nearly 40%, making its quarter the most profitable quarter in the history of any American business.

A stupendous gold mine is the iPhone. There is no product Apple can invent or reinvent that likely can replace it. To the business-savvy mind this can only indicate one thing: If Apple were to build a car, it would be to protect the iPhone business. If Apple builds a watch, it’s to protect the iPhone business.

For all the company’s effort to divert attention to the design statement the new Apple Watch supposedly represents, for all the trotting out of design chief Jony Ive, one utterance puts the watch in proper context. It comes from the company’s own testers who claimed, after using the watch for a few weeks, they were fishing their iPhones out of pockets and backpacks many fewer times a day.

The iPhone has a weakness! What started as an incredible convenience has become a pain in the butt, an annoying friction in our consumption of digital services. Google has been experimenting with Google Glass for four years. Samsung and Huawei are testing the market with smartwatches of their own. If Apple doesn’t find an answer and someone else does, Apple’s $700 billion market cap could be in trouble. Indeed, when so much of the value resides not in the device but in the services that it delivers, many analysts already wonder how much longer Apple can keep charging princely prices for an iPhone not very different from hundreds of devices running Google’s and Microsoft’s operating systems.

Read the rest here.

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