The duel between analysts has now ended

As I promised earlier in this blog, I’m doing a blog post now that we have third calendar quarter results in.

The topic of the blog post?
Apple Watch.

More precisely I’m writing about what I called a duel between two analysts – Tomi Ahonen and Ben Bajarin. They had mutual “I’ll be man enough to admit if I’m wrong” – statements when Tomi said Apple Watch was a flop and Ben said it was not:

Let’s see what we know now, shall we?
Tomi said that if Apple Watch survives to 3rd edition, it is NOT a flop (and Apple Watch did survive to third edition) -> Apple Watch was not a flop.

On second quarter of 2017 Apple was the largest watch maker on the planet (when measured by revenue) -> Apple Watch is hardly a flop.

Tomi remembers to remind us that everything should be measured in unit sales instead of revenues. And in case one is comparing market shares, we should be comparing market shares based on unit sales (since – you know – selling 10 Yugos is a better score than selling 9 Rolls Royces). That is his metric – fine. In Tomi’s preferred metrics Apple was #1 in unit sales. (And get this – we didn’t even have to compare just smartwatches; all the cheap non-smartwatch wearables were included in the mix!) -> Apple Watch was not a flop.

So what do we have left?
This:

Apple watch 2nd edition was supposed to sell LESS than 1st edition (and therefore be a flop). Before doing any comparisons, a point I’d like to make:
First edition Apple watch was sold for 7 quarters before 2nd edition Apple watch was released. But Apple Watch 2nd edition was sold for only 4 quarters.
SO:
It would be insane to compare sales of both editions summed up (i.e. sales of 12 months to sales of 21 months) – there is no logic in that.
Therefore:

We can have an estimate on the quarterly sales of Apple Watch from the numbers provided by Horace Dediu (who is also known as @asymco in Twitter). And by doing what Tomi Ahonen himself does when he estimates the global smartphone sales: taking an average of the reported numbers of Gartner, IDC, Canalys and Strategy Analytics – the “four big analyst houses”. That is the metric Tomi himself has said is the best available. Gartner has not provided any Apple Watch sales numbers we could use so I’m reduced to IDC, SA and Canalys. That’s still better than what Tomi has left for Smartphones (SA and IDC). For all the analyst houses the sources are listed at end of post.
By those numbers the best 4-quarter period in 1st generation Apple Watch sales was indeed the first four quarters of Apple Watch availability. During that period the Apple Watch shipped 15.5 million units (according to Asymco) or 14.3 million units (according to the average of the three analyst houses). All four sources have that specific period as a clear four-quarter period that sold the most – and with a good margin.

The question remains: how many Apple Watches were sold during last four quarters – did Apple Watch 2 outsell Apple Watch 1 on its best sales period? For the most recent quarter (Q3 2017) we don’t yet have numbers from any of the analyst houses or from Asymco BUT we do have this from the Apple quarterly results earnings call [1]:

Apple CEO Tim Cook said that the Apple Watch saw unit growth of over 50% for the third consecutive quarter during Apple’s fiscal 2017 fourth quarter that ended Sept. 30.

We just need to multiply Q3 2016 number by 1.5 on each of the numbers we have on all four sources and that will give us a number to use to calculate Apple Watch 2 sales during last 4 quarters. That would be either 17.2 million units (Asymco) or 15.1 million units (the three analyst houses).
Therefore second edition Apple Watch provenly did sell more than first generation Apple Watch -> Apple Watch was not a flop.

Oh and remember the first year unit sales of the first edition Apple Watch we have from Horace and these three analyst houses? All of the numbers from each individual analyst houses and Horace are between 13.1 million and 15.8 million units shipped during first year. Tomi said that the Apple Watch could “maybe” sell 10 million units in its first year if Apple “revolutionizes the watch market” and at the same time “is lucky”.
Without revolutionizing the watch industry (at least if we ask from Tomi) Apple sold 13.1 to 15.8 million Apple Watches on first year – 131% to 158% of Tomi’s forecast that Tomi said could “maybe” happen IF Apple revolutionizes the watch market AND IF Apple is lucky (maybe then could happen). -> even by Tomi’s own metrics Apple Watch was not a flop.
And then for the records: other analysts predicted sales of 15 million as a consensus and Tomi (while keeping to his own forecast of “10 million maybe if Apple is lucky”) reported that consensus so he has both acknowledged and accepted that as the competing forecast.

(Tomi said 10 million, general consensus forecast was 15 million, reality was definitely way closer to 15 million than 10 million -> Tomi says he is the most accurate forecaster. My 2 cents.)

I’m calling it quits on my behalf. Those two gentlemen could now show how the “I’ll be man enough to admit if I’m wrong” works. (Tomi is the one who should start.)

P.S.

I am aware that for the recent year a “Series 1” Apple Watch (the refreshed version of the first generation Apple Watch) was sold alongside second edition Apple Watch. We cannot exclude the sales of it from the numbers – there are no data points to do that.
BUT:
Any “series 1” Apple Watch sold after launch of Apple Watch 2 is in the end “sales after second editon” as far as Tomi’s point should be made: If the initial customer appeal to Apple Watch was to fade and sales should have gone down from what 1st edition sold due to early adopters, the sales after the launch of 2nd edition Apple Watch should be less – Series 1 included or not.
ALSO:
Throughout the history of iPhone Tomi has himself counted one year sales of iPhone as “sales of that year’s iPhone” – i.e. any sales after launch of iPhone 5 is counted as “iPhone 5 sales” even though both iPhone 4S and iPhone 4 were still sold alongside iPhone 5. Why should we treat Apple Watch 2 any differently?

REFERENCES:

[1] https://www.appleworld.today/blog/2017/11/2/the-apple-watch-sees-its-third-consecutive-quarter-of-50-growth

IDC Apple Watch sales:

https://venturebeat.com/2015/08/27/3-6-million-apple-watches-shipped-in-q2-2015-says-idc-making-apple-no-2-in-wearables/
IDC: Apple Watch sales hit 4.1M in Q4 making Apple #2 in wearables behind Fitbit
Apple Watch sales make it top smartwatch in Q1, but trail basic wearables from Fitbit & Xiaomi
https://www.idc.com/getdoc.jsp?containerId=prUS41611516
https://www.idc.com/getdoc.jsp?containerId=prUS41875116
IDC: Apple Watch’s record Q4 makes it #3 in wearables market as leader Fitbit declines, #2 Xiaomi widens gap
https://www.idc.com/getdoc.jsp?containerId=prUS42707517
https://venturebeat.com/2017/08/31/idc-wearables-grew-10-3-in-q2-2017-xiaomi-leads-apple-and-fitbit-as-samsung-drops-out-of-top-5/

Canalys Apple Watch sales:

https://www.canalys.com/newsroom/almost-7-million-apple-watches-were-shipped-two-quarters-availability
Fitbit market leader in basic bands, Apple Watch set to grow: Canalys
https://www.canalys.com/newsroom/media-alert-smart-watch-market-grows-60-q3-2016-apple-ships-28-million-units
https://www.canalys.com/newsroom/media-alert-apple-watch-has-its-best-quarter-and-takes-nearly-80-total-smartwatch-revenue-q
https://www.canalys.com/newsroom/media-alert-fitness-bands-stall-q1-2017-apple-helps-smartwatches-grow-25
https://www.canalys.com/newsroom/apple-falls-third-place-q2-2017-wearable-band-market-smartwatches-receive-boost-second-half

Strategy Analytics Apple Watch sales:

https://www.strategyanalytics.com/strategy-analytics/news/strategy-analytics-press-releases/strategy-analytics-press-release/2015/07/22/apple-watch-captures-75-percent-global-smartwatch-marketshare-in-q2-2015
https://www.strategyanalytics.com/strategy-analytics/blogs/wearables/2015/10/28/apple-watch-captures-74-percent-global-smartwatch-marketshare-in-q3-2015
https://www.strategyanalytics.com/strategy-analytics/news/strategy-analytics-press-releases/strategy-analytics-press-release/2017/02/01/strategy-analytics-apple-watch-returns-global-smartwatch-shipments-to-1-percent-growth-in-q4-2016
https://www.strategyanalytics.com/strategy-analytics/news/strategy-analytics-press-releases/strategy-analytics-press-release/2017/05/04/strategy-analytics-apple-becomes-world%27s-no.1-wearables-vendor-in-q1-2017
https://www.strategyanalytics.com/zh/strategy-analytics/news/strategy-analytics-press-releases/strategy-analytics-press-release/2017/08/03/strategy-analytics-xiaomi-becomes-world’s-no.1-wearables-vendor-in-q2-2017

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