$AAPL Home Game Earnings Preview Digest for FQ4 2016 (Part 4): Watch and Other Products Commentary
(This is excerpted from my “unapologetically” TL;DR earnings preview. Full link to the 4000+ word post here. Important note + disclaimer here.)
Year-ago Other Products Revenue: $3.05B
My Horseshoe Toss for FQ4: $2.56B
Series 1 and 2 and the ceramic Edition seem quite well-received — but that’s mostly a story for next quarter.
Still, Series 1 and 2 did launch with the same nine selling days remaining in FQ4 2016, and in an iPhone 7-rivaling 27 countries (including China). Obviously, in terms of points of sale, iPhone wins and it’s not even close.
All the same, it’s not hard to imagine Apple, with a bit less engineering to do for Series 1 and 2 (form factor not entirely new, though plenty of welcome changes), selling a substantial number of Watches in that “burst sales” interval through the sales channels it does have so far. And if Watch “does well enough”, those points of sale will expand, quickly.
What’s it all mean in unit sales, though? I don’t have a clue, and not like Apple will say. Maybe a little under 2M units total, combining residual sales of the old Apple Watch? Perhaps $375 is too high of an ASP assumption (prices start from $269/299 for Series 1 and $369/399 for Series 2, up to the $1249/1299 Series 2 Edition), but really, this is just part of the exercise to get a total Other Products number, which Apple does report.
Series 1 and 2 look like some very nice updates, and as a bonus, watchOS 3 appears to have made it so even the first-gen Apple Watch is no longer a slowpoke. 12-month sales cycle growth in Watch is most certainly expected — let’s see if Other Products significantly outperforms its current revenue record of about $4.35B. Which, conveniently, is the year-ago holiday quarter number.
So, about “everything else” in Other Products. Basically comprised of accessories, from the A8-equipped Apple TV set-top boxes to Beats, Lightning cables, spare Lightning adapters for 3.5mm headphone plugs, cases for iPhone and iPad, AirPods (well, for the holidays), replacements for lost AirPods, and so on and so forth.
I used two approaches. The first is looking at YOY comparisons. Two years ago, Other Products was about $1.9B. So I figure the category, even assuming Beats headphones haven’t been selling super-well, should be at least stable when you consider the installed base of iPhone 6 and up consumers, plus Apple TV A8, which didn’t exist until late last year. Then, look sequentially. Other Products was about $2.22B in FQ3. Against any “sales decay” in “stale” product such as Watch and aging 4th-gen Apple TV, there’s also burst sales from Apple Watch, and accessories sales activity related to the launch of iPhone 7 and 7 Plus. That’s how the ol’ Mental Blender™ arrived at around $2.56B, roughly between FQ3 2016 and FQ4 2015’s numbers.
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Index:
FQ4 2016 AAPL Earnings Digest, Part 1: iPhone
FQ4 2016 AAPL Earnings Digest, Part 2: iPad
FQ4 2016 AAPL Earnings Digest, Part 3: Mac
FQ4 2016 AAPL Earnings Digest: Looking Ahead to FQ1 2017 (the big December quarter)
