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Apple Inc. (NASDAQ:AAPL) Watch Debut – Wall Street is Wrong

Apple Inc NASDAQ:AAPL watch and iphone package deal

Apple Inc.  smart-watch is performing much better than what last quarter earnings led investors to believe, industry tracker IDC said in a report.

apple inc watch

During the second quarter, the tech giant shipped 3.6 million watches, just 800,000 units less than the dominant player in wearable industry, Fitbit Inc., according to IDC. That led to jump in Apple Inc. ’s share of the wearables market to close to 20 percent, while Fitbit accounted for 24 percent of sales, down from 30 percent a year ago.

Apple Watch Numbers Were Grossly Under-Estimated

“Once we peeled the onion back, it became apparent to us that this watch was bigger than we thought,” said Ramon Llamas, lead author and IDC’s research head of wearables.

However, not much was known about how IDC arrived at those numbers. All Llamas said was that he and his team had collected data from multiple sources, including component suppliers for the Apple Watch.

Apple Inc. did not provide any details about Watch sales in its most recent quarterly numbers. But going by comments from Tim Cook, the consensus on Wall Street was that sales had failed to match expectations. Analysts surveyed by FactSet ahead of Apple’s quarterly results forecast Watch sales of 4 million. Cook had earlier said that Apple is desisting from providing data on the device so as not to give rivals any undue advantage.

At least in the short-term, Apple Watch sales cannot make or break the firm’s financial performance. The iPhone is by far Apple’s biggest revenue earner. iPhone sales totalled $31.37 billion for the second quarter, accounting for more than 63 percent of its total sales of $49.6 billion. Having said that, the smart-watch is an important growth component for the firm. The IDC had projected in June that during the current year, 72 million wearable devices would be shipped; a whopping a 173 percent y-o-y increase, largely due to the entry of the Apple Watch.

Piper Jaffray Questions IDC Figures

Analyst Gene Munster, who in a research note to investors in July projected Apple Watch sales of 2.5 million units last quarter, is skeptical about the IDC numbers. He suggests that if IDC’s 3.6 million-unit figure were correct, then that would imply a sharp deceleration in the sales of the iPod and a host of offerings with which Apple Inc. bundles Watch revenues.

Munster said, “To get to the numbers that IDC has requires some pretty difficult assumptions. The ‘Other’ stuff beyond the watch would have had to have totally imploded.”

Munster had expected Apple Inc. to ship 3 million watch units before the firm reported its earnings last month, and slashed it by 500,000 post the results.

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