It wasn’t that long ago that the folks who make a living predicting what people will buy saw the PC on the rise. Wait… what? Yes, back in June of 2011, the research firm IDC was confident that the personal computer, whose sales growth was barely slowed by the great recession, was on its way to a record 438 million units last year. And, better still, it would hit 541 million sold by 2015. Unfortunately for the venerable PC, those forecasts proved wildly optimistic. It turns out sales actually fell in 2012 and then again in 2013. Things got so bad that IDC now believes their might not be 300 million PCs sold again in any year through 2018. Maybe not ever again.
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IDC has been tracking the PC industry for as long as there’s been one. And three decades into this, the computer is a pretty well understood and mature product. Yet just 3 years ago, these guys were spectacularly wrong on something they understand really well. So when it comes time to predict how an entirely new product category will do, especially when we’ve yet to see perhaps its most important product, you can imagine the margin for error is rather large. Keep that in mind when you hear predictions about how Apple’s much rumored wearable, the so-called iWatch, will do in the marketplace.
Nevertheless, Wall Street is trying hard to guess. A bit over a week ago, Piper Jaffray published the results of a survey on interest in wearable technology. As reported in AppleInsider, the results suggested that 14% of respondents would be interested in an Apple smartwatch priced at $350. The survey further found that almost half of those who said they weren’t interested at $350 could be enticed by a lower price. Notably, though, this was a tiny sample, 61% female and almost entirely in North America. In other words, it probably tells us very little: A small minority of American women are interested in a technology product whose features they have little knowledge of and that’s almost twice as expensive — out of pocket — as their iPhone.
Other analysts skipped the pretense of a survey. Keith Bachman of BMO Capital Markets simply concluded that there were 335 million iPhones in use and at least 10% of owners would buy Apple’s watch, estimating first year sales at 33.5 million. Or 50+ million if the figure reached 15%, he said. InvestorPlace reports that UBS analyst Steve Milunovich pegged the number at 21 million sold in the first year, presumably just an estimate derived from something.
You can see these are nothing more than guesses. And while they are within a narrow band — no one believes that Apple will sell 100 million smartwatches in 12 months for example — they follow a pattern of being conservative but confident that Apple’s offering won’t be a total dud.
As the PC example above illustrates, this kind of thing doesn’t always get easier once a product is out in the market either. Just a few months before that ill-fated IDC forecast for PCs, the folks at IHS, a competing firm, took a look at the tablet market. The iPad had been announced a year earlier and was a hit. It would go on to sell about 40 million units in 2011 and reach 74 million by 2013. Not only was the IHS forecast nearly perfect, the firm correctly called the “cresting” of the iPad wave. While the growth has been impressive, the 2013 result was only 12% higher than the prior year.
In September of 2011, though, The Guardian ran a story on another tablet forecast, this one from Gartner, that was almost as off as IDC’s PC prediction. It failed to foresee the growth of Android tablets, which now lead the market in unit sales, and optimistically believed Apple would sell 148 million iPads next year. Given that Apple started 2014 with a decline in units against 2013 (which the company has attributed to inventory factors among other things), it’s likely that iPad sales will continue to grow slowly from here over the next couple of years. That’s no knock on Apple, which has built a high-volume and high-value product out of nothing. But there is simply no chance the company will move 148 million iPads next year — nearly doubling last year’s result — unless it radically alters its pricing strategy.
Which brings us back to wearables. IDC is back with another forecast that calls for 19 million wearable devices to be sold this year on the way to a remarkable 112 million by 2018. The summary of the report, however, is bullish on devices whose “value proposition has yet to be completely clarified” it admits. NPD DisplaySearch shares IDC’s optimism, but thinks the road will be bumpy. It uses similar language about “value propositions” to justify its belief that customers will buy lots of wearables, then buy fewer, then eventually buy more once they know what they are getting and, presumably devices deliver the right features at the right prices. If you find that confusing, don’t worry much — they’re basically taking an educated guess.
Recent history has shown that the best of these forecasts can be remarkably good while the worst can be remarkably bad. That the methodologies vary from extrapolation to survey to simply taking a proportion of Apple’s installed base tells you that no one really has much idea what’s going to happen. But perhaps equally importantly, the interest is so high because this is the product that Apple watchers have been anticipating now for 4 years. It’s something entirely new and allows skeptics to question whether it will be popular at all. Something similar happened with iPad. And iPhone. And iPod, too. Apple would be delighted if the iWatch — or whatever the actual name of the product ends us being — finds similar success.
Exactly which of these forecasts it thinks is most appropriate is another matter entirely.
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