The sudden interruption of most Apple Watch sales during the all-important holiday shopping season could potentially lead to another sales decline for the tech giant’s December quarter.
But that will depend on how many consumers decide to quickly purchase the Apple Watch Series 9 and Apple Watch Ultra 2 models before sales are halted in the coming days due to a patent dispute. Consumers can purchase both product lines on Apple Inc.’s AAPL.
website until Thursday, December 21 and in retail locations until December 24.
So the question is whether a sudden increase in sales in the last week of Christmas shopping can compensate for the potential lost sales. However, it is worth noting that several major retailers, such as Best Buy Co BBY,
Target Corp. TGT,
Walmart Inc. WMT,
and Amazon.com Inc. AMZN,
had already reduced the price of the base model of the Apple Watch Series 9 by $70, from $399 to $329, and some also reduced the more expensive Ultra 2 model from $799 to $750.
Last quarter, Apple Chief Financial Officer Luca Maestri said total revenue in the December quarter would be “similar” to a year ago, when Apple reported revenue of $117.1 billion, leaving the door open for a flat or potentially lower sales. After earnings fell for the fourth consecutive quarter, some analysts lamented the company’s sheer size, noting that with $89.5 billion in fiscal fourth quarter sales, it resembled a “big battleship” that was “just a made a little progress.” ”
Also read: Apple’s grim streak of revenue declines could continue into the holiday season as well.
The Apple Watch has made a greater contribution to Apple’s revenues since its introduction in 2015. While Apple doesn’t break down its specific revenues, the Watch falls under the wearables category, which reported fiscal 2023 revenues of $39.8 billion, down from $3.4 billion. % from a year ago. Analysts estimate that Apple Watch accounted for $23.8 billion in that segment, including $12.9 billion in accessories, according to FactSet.
The disruption in Apple Watch sales is due to a ruling by the U.S. International Trade Commission, which found that Apple had violated patents related to an oxygen blood sensor owned by medical technology company Masimo Corp. MASI,
in most new models of its smartwatches since 2020. Shares of Apple fell slightly, down 0.9% on Monday, while those of Masimo rose 3%.
Apple said in a statement that it strongly disagrees with the order and that it is “pursuing a range of legal and technical options to ensure Apple Watch is available to customers.” It is not clear whether the technical options referred to would involve developing new versions of oxygen sensors or licensing any technology from Masimo. Bloomberg News reported that Apple is working on possible solutions, including software fixes, so that sales of the devices can quickly resume.
Whatever happens in the coming weeks, Apple investors should be prepared for a fifth straight annual decline in quarterly revenue, a worrying milestone not seen since 1998, FactSet data shows.