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Apple Inc. Watch Gets AI Boost as “Holiday Inflection” Looms

Paul Shea

Apple Inc. attracts plenty of analysis from across Wall Street, but some of the strongest hopes for the firm’s coming Christmas season may stem from a very different kind of forecaster. Watson, the Supercomputer from International Business Machines Corp. , says that Apple will have the hottest selling product this holiday season.

Apple Inc NASDAQ:AAPL watch and iphone package deal

Watson, which is a supercomputer that’s being used across the world for all sorts of data analysis, reckons that the Apple Watch has a full 100 percent trend score for the coming shopping season. You can see the device at the top of Watson Trend, an IBM app that tracks what people are talking, and thinking, about. The Apple Watch has more than double the score of the second-place items.

Apple bets on the Apple Watch

The device, which got off to decent if not red hot sales earlier on in 2015, is the one of the only truly  new forms of hardware that has emerged from Apple under Tim Cook. Everything else was either an iPad, an iPhone, or a Mac. The Apple Watch is wholly different.

It’s not just computers that think Apple Inc.  wearable will be a major seller however, though some on Wall Street are being informed by the analysis performed by International Business Machines Corp. . Brian White of Drexel Hamilton made reference to the IBM machine in his report on the forecast for the wearable device.

In the eyes of Mr. White, “this holiday could be the inflection point for the Apple Watch, driving an acceleration in the adoption rates in 2016 and beyond.”

The Consumer Technology Association reckons 90 million people will buy tech goods this week while the National Retail Federation says that about 135 million will shop in the coming holiday week.

White says that between Watson and data from the various retail associations, it looks like 2015 could be a bumper Christmas and Apple is likely to disproportionately gain from the extra spending.

White has a $200 price target on shares in Apple, and he seems sure that the Apple Watch is going to be a vibrant category for the firm going forward. Signs that it’s picking up steam should begin to appear as soon as this holiday season.

Apple Inc. sales forecasts diverge

There was a lot of variation in the number that Wall Street was pegging for Apple Watch sales in 2015. Gene Munster of Piper Jaffray found himself at the bottom of the pile with a paltry, and mostly accurate it seems, forecast of 9 million units during the year. Trip Chowdhry of Global Equities Research, however, was looking for sales totaling more than 40m.

Strategy Analytics reckons that Apple sold about 4.5 million units of the Apple Watch during the three months through September. That brings the total sales of the device, in the view of the research firm, to just over 6 million.

Mr. White may expect that number to increase substantially in the fourth quarter, but ti doesn’t seem likely that Trip Chowdhry or Katy Huberty of Morgan Stanley, who forecast sales of more than 30 million, will be proved right about the sales of the device.

Canalys analyst Daniel Matte reckons that Apple has sold about 7 million units of the Watch so far. That’s not far off of the number from Strategy Analytics and, since the numbers are checked against Apple accounts, something in that range is the likely number for sales so far.

Those with shares in Apple, worried about the firm’s slowing sales of the iPhone, may be looking for the Apple Watch to jump in and fill some sort of gap in growth in its first year. It’s almost certain now that that’s not going to happen. For some time to come, Apple will rely on the iPhone and the Apple Watch, though an impressive grower, isn’t going to change that for a very long time.

Apple Watch is changing the world

Whether or not Apple manages to capture huge profits from the Watch, it’s clear that the device has had a massive impact, and in fact it has already changed the world.

The biggest drop in Swiss Watch sales since the financial crisis occurred in November as buyers in Asia, or more specifically Hong Kong, chose to forego the purchase of Swiss imports. It’s not known whether those dollars are being funneled into Apple, or whether those buyers just don’t see the devices as worth investing in any more.

Shipments declined by 12 percent year over year in October. It’s assumed that the Apple Watch is responsible for a good deal of that change, and that a fall in demand is the culprit. The entire market as worth $2B in October, making it a substantial prize for Apple to capture.

Apple’s talent has always been, however, selling more expensive versions of goods to ordinary people. Apple’s growth won’t be ensured even if every Swiss Watch buyer gets an Apple Watch instead. That would bring the firm only the 10 percent growth that Wall Street seems to want each year in order to drive shares upward.

Instead it’s the $350-$600 versions of the Apple Watch that are going to form a huge part of the firm’s growth if Mr. White is right. Tim Cook and his team will need to move fast however. Tag Heuer has already released its first smart watch, while the rest of the old world isn’t all that far behind.

Apple hides its numbers

At the very least the sales of the Apple Watch over the coming months will provide a nice test for International Business Machines Corp. . The firm will be able to test and refine how it calculates the hottest trends heading into the holiday season.

Unfortunately for Watson and the rest of the IBM team, it may be hard to rigorously test those results. Apple Inc.  doesn’t really like to talk hard numbers when it comes to sales of the Apple Watch, and it seems that the firm has no plans to share the sales of the device with the world. There’s a lot of estimations out there, but IBM’s Watson may not get what he really wants for Christmas: a testable hypothesis.

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