Apple Watch steals show from biggest iPhone ever

Apple will first roll out Apple Pay in the U.S., and it has struck deals with the three largest U.S. credit card companies -- American Express, MasterCard and Visa. It has also notched agreements with various retailers, including Macy's, McDonald's, Walgreens and Whole Foods, all of which are in the process of installing terminals.

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Some major websites, including Apple's own online store, as well as Groupon, Target and Uber, will integrate Apple Pay with their iOS apps.

"This is the first payment system that I think has a chance of success," said Baker. "They have the banks, they have the retailers, they have the credit card companies. This will be huge."

Apple Pay will launch next month, and the software support will be provided as an over-the-air update to iOS 8 at that time.

Just Watch me

But the star of the show wasn't an iPhone, or even the large-screen iPhone Plus, or Apple Pay.

"We have one more thing..." said Cook, using a line made famous by Jobs. Those five words that got some of the biggest applause of the morning. "We love to make great products that enrich people's lives," he went on. "We've been working incredibly hard for a long time on an entirely new product. It is the next chapter in Apple's story. Apple Watch is the most personal device we've ever created."

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The wearable is a combination timepiece, a link to the iPhone for tasks such as notifications, email and calls, and a health and fitness device.

"Wow," said Baker. "We didn't see an announcement for a watch, we saw a collection of watches, with a slew of apps. It's so much more than a watch."

Rather than relying on gestures for navigation and operation -- an approach that wouldn't work on such a small display -- the Apple Watch uses a "digital crown," the rotating wheel atop the stem on a traditional watch. The device is also touch-enabled and uses a chip to provide tactile feedback.

Apple called it the "Taptic Engine," a play on the word haptic, the term used to describe tactile feedback technology that mimics touch, usually with small motors.

"I'm very impressed," said Gottheil, who admitted he had been a skeptic going into the Apple event. "It looks like Apple's [Watch] solved a number of the design problems in all current smartwatches, including navigation, tactile feedback and an understanding that it has to be as fashionable as you can make a device like this."

Carolina Milanesi, chief of research and head of U.S. business for Kantar WorldPanel Comtech, also praised the Apple Watch, or more accurately, how it meshed with what Apple introduced earlier in the 1 hour, 45 minute unveiling. "It really made sense to have all this together, the iPhones and the Apple Watch," said Milanesi. "They are complementary. This was about the bigger Apple, the bigger ecosystem."

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The device's crystal is made of sapphire -- the ultrahard material that Apple has spent millions on -- and the Watch can be fixed to six different bands, including a sports band, a leather one and one made of steel links, some of them available in several colors. Apple Watch will come in two physical sizes -- essentially one for women and another for men -- but the combination of watch materials and bands let Apple create three different collections, including one in gold.

"Apple recognized that you need two sizes, but this is still 'geekware,' it's still descended from a calculator," said Gottheil. "But the design and the [multiple] bands really move it into true 'watch' territory."

In a demonstration, Kevin Lynch, who was Adobe's CTO before being hired by Apple last year, showed off the Apple Watch's functions and features, ranging from support for incoming notifications -- with the most-likely replies displayed after an analysis of the incoming message -- and an integrated Siri digital assistant to the ability to receive calls and view photos taken earlier by an iPhone or an iPad, or with a camera whose contents have been uploaded to a Mac or simply placed in the Photo Stream.

The Apple Watch also acts as a miniature GPS device, complete with walking or driving directions, with haptic feedback to indicate turns and their direction. Reaching out to contacts can be done via phone calls, texts or a new mode, called "Digital Touch," that lets users draw on the small screen.

Developers will be able to build and customize their apps using "WatchKit," said Lynch, who showed bits and pieces of apps from the likes of Facebook, Twitter, Pinterest, American Airlines, Major League Baseball and Nike.

Apple Watch also works as a health and fitness device, courtesy of new apps called Fitness and Workout. Sensors within the device measure the wearer's heartbeat, track his body movements, and monitor his sitting time. Data can be shared with the iOS 8 Health app on an iPhone.

Apple Pay will also work with the new wearable.

The new device requires an iPhone; it will work with the iPhone 6 and 6 Plus, as well as the 5, 5C and 5S. It will start at $349 and will be available early next year, as recent rumors claimed. "And it will be worth the wait," Cook said.

Baker, Gottheil and Milanesi were each taken with the Apple Watch, and they said they believe it has the potential to become a major revenue stream for the Cupertino, Calif.-based company -- if not on the level of the iPhone, then certainly with an opportunity to become as important to the bottom line as the iPad or Mac.

"Apple today said, 'See, we can do it,'" said Gottheil when asked if there was a problem with the several-month lag between the introduction and the on-sale date for the Apple Watch. "I think they were eager to do that, to answer the criticism, to put an end to the discussion 'Can Apple innovate?'"

Milanesi, who like Baker was at the event -- Gottheil watched the webcast -- was most impressed with a seemingly minor detail which actually preceded the event. "Half the people in the audience were Apple employees, all sitting in the front. Reporters and analysts were toward the back," said Milanesi. "That was a nice touch. This was all about the new Apple, the company, not a single person, not one product, but all the products together."