Apple May Have Sold at Least 1.9 Million Watches in First Period

Apple Watch: Going the Way of the Newton PDA?

Apple Inc., which isn’t breaking out sales of its new smartwatch, said revenue in the category containing the device rose by about $950 million during the past quarter compared with the previous three months in which the gadget wasn’t sold.

“Well more than 100 percent of that increase comes from Apple Watch,” Luca Maestri, Apple chief financial officer, said Tuesday in an interview.

If the Apple Watch had an average selling price of $499, the average estimate of five analysts surveyed by Bloomberg, that would suggest the company may have sold at least 1.9 million watches. That estimate, however, doesn’t factor in what revenue was generated by customers buying multiple watch bands or other changes in the segment, such as iPod sales declining.

Cupertino, California-based Apple said in October that it would limit how much information it released about Watch sales, lumping the device into a new revenue category called “other” along with iPods, Apple TV, Beats headphones and speakers. Other revenue rose $952 million to $2.64 billion in the quarter from the first three months of the year, the company said Tuesday in a statement.

Apple Chief Executive Officer Tim Cook cautioned against trying to back out Watch revenue from the Other category’s rise.

“If you look at the Other products category and look at the revenue in this category, it would not be an accurate thing to just look at the sequential change or the year-over-year change and assume that was the total Watch revenue because the aggregate balance of that category both sequentially and year-over-year is shrinking, obviously iPod is a part of that,” he told analysts.

Broader Distribution

Apple will expand Watch point-of-sale distribution going forward, Maestri said.

“We looked back at similar periods for iPhone and iPad when they were originally launched and we’ve actually sold more Apple Watches than we sold iPhone and iPad at the time,” he said. “We feel very good about the start and what we feel particularly happy about is, frankly, the customer response, the feedback we’re getting.”

After the iPhone’s release in late June 2007, Apple shipped 1.39 million smartphones in its first three months, plus a few days. The iPad tablet hit stores in April 2010 with sales totaling 3.27 million in its first quarter on the market. The company’s silence on demand for the watches has made it difficult for analysts to gauge the device’s success. Estimates for unit sales for the quarter that ended in June range from as little as 3 million to as many as 5 million.

Gene Munster, an analyst at Piper Jaffray, estimated that Apple sold 1.2 million watches during the quarter based on an average selling price of $550.

“We believe the number may fuel investor concerns about the near and long-term wearable opportunity,” Munster wrote Tuesday in a note to investors. “We caution that it’s too early to write the Watch off and believe native apps this fall are the next step toward an inflection point in CY15, which is unchanged from our thinking from when the Watch launched.”

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