Wall Street analysts continue to cut their Apple Watch sales forecasts and revenue expectations, raising new questions about the wearable and smartwatch markets. Indeed, Apple will likely sell about 11.89 million smartwatch units for the company's fiscal 2016 year ending in September, according to a J.P. Morgan estimate. That's down dramatically from an earlier projection of 23.5 million unit sales. For Apple's fiscal year 2017, J.P. Morgan now expects Apple Watch to sell 14.3 million units -- a far cry from the firm's earlier forecast of 41.6 million units. Shift the conversation from unit sales to dollar figures and the situation becomes more depressing. For fiscal year 2017, Apple Watch will generate about $5.7 billion -- far short of J.P. Morgan's original $16.5 billion estimate for fiscal 2017.

The Real Problem

At first glance, the revised estimates from J.P. Morgan suggest Apple Watch is a failure. But take a closer look and consider these two factors.
  • Is generating nearly $6 billion in revenue during the third year of a product's availability really a failure?
  • Since Apple never really discusses smartwatch sales figures or associated forecasts, don't J.P. Morgan and other research firms deserve blame for widely optimistic forecasts that missed the mark?
Perhaps Apple still deserves some blame, however, since the company never really attempted to manage sales and revenue expectations for the watch. Overall, the global smartwatch market will enjoy a 12 percent compound annual growth rate from 2016 to 2020, according to Research and Markets. Apple seems to be growing faster than the market, and therefore grabbing market share. Also, Apple is preparing watchOS 3 enhancements that should deliver a faster user experience. But business-centric and vertical market applications have yet to push Apple Watch beyond its novelty device status. Still, retailers like Best Buy are offering special Apple Watch discounts to clear out inventory before new versions of the device arrive later this year...