Today's question: Is Apple's CEO hiding weak smartwatch sales or does he demonstrate transcending leadership by positioning for greater platform success—taking the long view? The answer lies perhaps in his comments made during the fiscal Q3 earnings conference call.
In the data released, Strategy Analytics puts Apple Watch shipments at 4 million for the April quarter. Yesterday, Canalys gave estimate that is 200,000 units higher. Posting to BetaNews, analyst Sameer Singh calculates 3 million devices shipped and 2.5 million sold. Apple doesn't share the real numbers that it surely has. In chief executive Tim Cook's remarks that follow, there are hints—but little more. Something he says later in the conference call is quite provocative; genius and contrary-logistics-thinking. Either he's hiding or abiding.
The Conference Call
Let's begin with Cook's canned remarks given easy-on. They are edited to remove natural pauses like "ah". He is all praise about how great are Apple Watch sales, without disclosing anything quantifiable:
During the Q&A, Piper Jaffray analyst Gene Munster asked what surely his colleagues also wondered about: "The watch has been under a lot of interest from investors and some may have wanted a little bit more. You outlined some of the opportunities and some of the progress you've had. But any thoughts that you have for investors who may say that the category is just not taking off as fast as they would have hoped?"
Later in the call, Cook said: "On the watch, our June sales were higher than April or May. I realise that's very different than what some of the, is being written, but the June sales were the highest, and so the watch had a more of a back-ended kind of a skewing".
What Does It Mean?
You can judge the comments for yourself, but consider this: Apple breaks out performance for iPad, iPhone, Mac, and Services. The company stopped separately reporting iPod as sales declined but also for retail stores, even as their revenues rise. Cook and Company choose not to reveal Apple Watch sales, and the competitive-intelligence reason rings hallow given the long-standing propensity to boast shipment numbers for new products—particularly those entering or creating new categories.
One interpretation is easy: The smartwatch's early sales performance is tepid, which if disclosed could create negative perceptions about Apple's future during the post-Steve Jobs era and Cook's first big product launch. By another measure, Cook also said that "our objective for the quarter wasn't primarily sales", which is a great excuse for weak performance. Doh, of course, Apple cares about sales—otherwise why charge premium prices that generate nearly 40 per cent gross margin?
Another interpretation is reasonable: The chief executive, in context, emphasised the importance of "how the product is positioned for the long-term, because we're starting a new category". Sales will come later, as the platform goes. Assuming he is being straight, then sales really might not be the early priority, as Apple seeks to build out an ecosystem. In the context of platform-building, withholding sales data really could be about competitive intelligence.
That said, platforms need apps and adopters. People generally don't adopt if there are no apps, and developers don't create apps if there is no demand. It's a longstanding chicken-and-egg problem—which comes first: Apps or users? Apple has some leverage from iPhone, but other than, say, HealthKit no real compelling killer app. By contrast, Google Now is a fantastic killer app for Android Wear, which vested hardware partners are many to Apple's one.
This brings Apple to platform building, extending from watchOS 2, and preparing for holiday sales. My prediction: The device fails or sails during the Christmas quarter.
At present, I see no other conclusion other than Apple is hiding smartwatch sales data. The question: From whom? Is it Wall Street or wearable competitors? Or even both? You decide.