Should Apple Worry About the Google Watch?

The current buzz in technology centers on the Apple Watch. Consumers will finally get to take one home in one month and one day, and pre-orders begin in two weeks.
Already we’ve seen a major shot at Apple (NASDAQ: AAPL) and its Apple Watch coming from one of its strongest rivals: Google (NASDAQ: GOOGL).
Just weeks after Apple formally introduced its Apple Watch, Google announced its own entry into the smartwatch market. Unlike Apple, which is producing the Apple Watch on its own, the Google Watch will be produced in partnership with luxury watchmaker TAG Heuer and Intel (NASDAQ: INTC).
TAG Heuer is a subsidiary of luxury brand Louis Vuitton Moet Hennessy (OTC: LVMUY) and is a powerhouse in the luxury watch market that Apple is attempting to disrupt. But with a $349 Apple Watch Sport, Apple is going after a completely different customer than it is with its $17,000 18-karat gold Apple Watch Edition.
Indeed, the latter product is intended to appeal to the same customer to whom TAG Heuer sells its luxury watches, which range from $1,200 to $70,000 each.
TAG Heuer’s challenge to Apple Watch seems highly focused on Apple’s lack of credibility in the watch market – real or not.
TAG Heuer CEO Jean-Claude Biver had this to say about the Apple Watch: “The difference between the TAG Heuer watch and the Apple Watch is very important. That one is called Apple and this one is called TAG Heuer.”
The implication is that, without TAG Heuer’s 155 years of watchmaking experience, Apple can never produce a timepiece that is superior to those made by traditional European watchmakers.
As Apple has proven with its iPod, iPhone, iPad and Apple Pay, it doesn’t have to be the first to enter a market in order to dominate it. The company has also proven that it doesn’t have to have extensive experience in a certain industry to enter, disrupt and eventually dominate it.
Surely Apple is hoping to follow its own proven recipe for success.
The Apple Watch will build off of smartwatches produced by Sony (NYSE: SNE), LG and Samsung. It will also tap into the wealth of purchasing power found in the network of existing Apple customers and the ecosystem these customers have more or less locked themselves into. It features beautifully designed and well-polished hardware, seamless integration with Apple’s other products and software and a simple user interface.
Indeed, the Apple Watch seems to be well on its way to domination.
I personally believe that, despite a lack of clarity about how exactly the product will be used, the Apple Watch will be a successful product for Apple. But I also believe the Google Watch will be a successful product for Google and its partners.
There’s no reason why there can’t be two – or more – major players in the smartwatch market.
Considering that, at least for now, these devices must be tethered to a phone, it makes sense that the major players in the smartphone market would be able to dominate the smartwatch market as well.
In the case of smartphones, Apple sells fewer devices but makes considerably more money on each device. Google seems to be doing quite well producing operating systems for Android phones using the high-volume, lower-margin model. For its part, Apple seems quite content with its lower-volume, high-margin model for selling smartphones.
I see the smartwatch market playing out similarly.
The Apple Watch could see millions fewer devices sold than the Google Watch and both could still count it as a “win.”
Will the Google Watch kill the Apple Watch? No.
In fact, in order for both to succeed in their own way, I think it’s important for both the Apple Watch and Google Watch to succeed.
DISCLOSURE: I personally own shares of Apple.

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