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) Apple Watch is a success or a failure depending on who you
ask. But regardless of what analysts think about the
its impact on AAPL's bottom line, for competitors in the
wearable business, it is a huge threat.
Franklin Heijnen via Flickr (Modified)
is one of several watchmakers feeling the pressure, and
with past difficulties raising capital and the recent layoff of 25%
of its staff, it is in real danger of being the device's first
Apple has a history of coming into new (for it) markets,
crushing any existing players and then dominating.
With the iPod, AAPL effectively killed
Sony Corp (ADR)
) Walkman, which was the de facto personal portable music
player for several decades. It also steamrolled the MP3 players
many electronics manufacturers had been introducing to take
advantage of digital music files.
When it released the iPhone in 2007, AAPL disrupted a very
established mobile phone industry and all but
eradicated smartphone pioneer
With the Apple Watch, Pebble finds itself in a familiar and
To call the battle between Pebble and Apple a David and Goliath
story is almost underplaying the severity of the mismatch.
Pebble did extremely well in helping to launch the current
mass-market smartwatch industry. It was a startup trying to succeed
in a product category that had existed on the periphery for many
years, but had never taken off with consumers.
Using crowdfunding site Kickstarter, the Pebble smartwatch
smashed records by collecting over $10 million in 2012. Several
generations of Pebble smartwatches upped its profile and by the end
of 2014, sales of Pebble smartwatches had surpassed
That doesn't sound like much, but considering only
6.8 million of the devices sold worldwide
that year, Pebble had a pretty decent chunk of the pie.
But in 2015, things got real.
Will Apple Watch Put Pebble on Its Death Bed?
AAPL released the Apple Watch that spring and it quickly
dominated the sales charts. Pebble was working on its next
generation Pebble Time - an updated smartwatch with a color display
and new UI - to take on the Apple threat, raising over $20 million
on Kickstarter. However, Apple had been developing the Apple Watch
for several years and had hundreds of engineers on the project.
Before the Apple Watch had even hit store shelves, Apple had spent
$38 million marketing
its new smartwatch.
The results were predictable and even if Apple didn't sell as
many units as many analysts had predicted (and AAPL investors had
hoped), 2015 was still a rout. The Apple Watch is estimated to have
taken two thirds of smartwatch sales for the
For Pebble, which was not only facing the Apple Watch threat,
but having to deal with a slew of other competitors running the
Android Wear operating system from
) Google, the impact was immediate.
and other outlets began reporting about funding issues and rumors
of loans being used to
keep the company afloat
The latest setback - having to lay off 40 employees, 25% of its
workforce - came just days after an Apple event where the
price of the Apple Watch was dropped by $50. Pebble's CEO told
that despite the layoff setback, his company wasn't going anywhere
and its plan going forward includes
focusing on categories like health and fitness
The problem with that strategy is it butts heads against a key
Apple Watch strength, including AAPL's ongoing push to integrate
its devices with health and fitness research initiatives. And
Pebble will also find itself in closer competition with
), the overall market leader in wearables that has begun adding
smartwatch-like notifications and features to its fitness
If there's a bright side in all of this, it's that smartwatch
sales are taking off and the growth is projected to continue.
smartwatch sales should surpass 50 million this
and hit nearly 67 million in 2017.
Where does this leave Pebble? In a tough position.
, Pebble has to convince not just potential customers, but also
investors that it can survive in a market that is now dominated by
massive companies like Apple. If consumers aren't convinced Pebble
will still be around in a few years, they're unlikely to buy its
Ultimately it seems inevitable that Pebble is going to be
reduced to a niche player in the smartwatch market. The question
will be whether it can continue crowdfunding its way to survival,
or whether the Apple Watch will finally claim its first
As of this writing, Brad Moon did not hold a position in
any of the aforementioned securities.
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