Even rivals are waiting for Apple to get into wearables

Market not worth spit  much less the time and money  unless someone transforms the category, argues analyst

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Dawson didn't have any special insights into what Apple might do in wearables/smartwatches -- rumors, circulating for ages, have intensified in 2014, with most Wall Street and industry analysts now believing Apple's entry is inevitable -- but he had some thoughts on what would happen if Apple did do as he predicted.

If Apple can reinvent the category as it has in the past, Dawson believed that it would kick off demand for wearables overall, just as it did with smartphones, and to a lesser extent, music players and tablets. "A rising tide floats all boats," Dawson said in an interview today.

That's not guaranteed, of course: It depends on what Apple ships. "If it's close enough to the current category, what Apple offers could prompt people without an iPhone to buy one. In that sense, if it does enter with a traditional smartwatch, there could be a halo effect," said Dawson, talking about iPhone sales.

He assumed that if Apple stuck to the current smartwatch model, but was somehow able to hurdle a host of technological challenges -- ranging from a thin, fashion-sense design to a long battery life -- it would both garner sales of the device(s) and boost those of the iPhone.

Such a strategy would not dramatically transform the category, however, and would not put much if any distance between Apple's offering and those from already-in-the-market makers, like Samsung or Pebble, or Motorola's Moto 360, which relies on Android Wear, Google's wearables OS. Fast-following, then, would be a distinct possibility.

But if Apple really leapfrogged the competition with something completely different, then bets are off. "Depending on what Apple launches, and the amount of innovation [in it], will drive how quickly others can copy it," said Dawson in the interview.

If Apple's able to reinvent the category, it "may take quite a while for others to catch up," Dawson continued. "The more different it is, the harder that's going to be."

Dawson cited the iPhone as an example. On the one hand, Apple essentially built the smartphone market, as we know it now anyway, giving now-rivals like Samsung an opportunity. On the other hand, because the iPhone was radically different -- largely because it was touch-based -- it took competitors a long time to replicate the iPhone.

"When the iPhone launched, it was very different from anything prior," Dawson contended (emphasis in original). "So it took a long time for Android [and Android phone OEMs] to even vaguely match it. But the iPad was basically a big iPhone, so you just stretched your smartphone and you had an iPad competitor."

Dawson expected that the situation for Apple's rivals, again assuming that the Cupertino, Calif. company hits the "reset" button for the market, would be more like the iPhone than the iPad. "I may have a product that matches [Apple's wearable(s)] on paper, but do I have a product that performs as well in fact?" asked Dawson. "It could be several years before others are truly competitive, even if within a year their wearables look similar on paper."

Cupertino...the world's R&D?

Some smartphone vendors have been raked over the coals for allegedly copying Apple's iPhone and iPad -- the most recent allegations have been aimed at China's Xiaomi -- and the same charges will probably be leveled at rivals that try to capitalize on Apple's entry in wearables.

Do others, then, simply use Apple has a free R&D arm?

"In a matter of speaking, I'd say 'yes,'" said Dawson. "The fast-follower thing has worked for smartphones."

Although that must irk Apple -- it certainly did that, and more, for former-CEO Steve Jobs -- Apple also gets something out the deal: The top of the market pile, at least for a time.

And that position, as Apple has found out, can be very lucrative. In the first three years of the iPad, for example, Apple recorded revenue of $67.7 billion.

"Apple's role in this market is hard to overstate," Dawson concluded in his written report. "If it enters sooner rather than later, we believe it will have a significant impact both on the smartwatch market and on Apple."

Dawson's report is available on the Jackdaw Research website to paying customers.

Copyright © 2014 IDG Communications, Inc.

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