These 3 Companies are Staking a Claim in the Wearable Technology Market
Michael is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
A few days ago, Intel's new CEO Brian Krzanich talked about the company's desire to expand into wearable technology. While doing so, he predicted that the wearable tech market will be "10 times bigger in magnitude" than the current smartphone and tablet market. That's a bold statement, but even if we take the conservative approach and predict that wearable tech will be equally as big as the smartphone and tablet market, then we can certainly expect companies that get there first to have a big advantage by capturing early market share.
Google (NASDAQ: GOOG)
Google glasses will be the catalyst for wearable technology. Judging from reviews by the number of beta-testers who were given the chance to receive an early pair, they will change the way people view technology. Here's an interesting review of Google glasses by tech blogger Robert Scoble, who tells us that he will never take them off because they're just that awesome.
It seems like the most important decision Google now has to make is pricing. The profit margin they aim for on each unit produced is key. It's rumored that the glasses will cost about as much as a smartphone, which means that Google is going to have to prove that they are worth it, and, even if they do, the glasses might not appeal to the masses due to the high price. It might be in the company's interest to lower the retail price for two reasons:
- The lower the price, the higher the demand will be. When a person owns Google glasses they will also have much more incentive to use other Google products (the glasses will be directly linked to Google+, other Google-sponsored apps, and Android phones). With a lower price and a higher market share, Google will see residual revenue from other sources.
- It's a copycat world, and by keeping the price low Google will leave fewer incentives for a different company to try to make a comparable knock-off version that's available for cheaper.
Apple (NASDAQ: AAPL)
The iWatch. No one outside of Apple can say that they know what it looks like and no one knows what exactly it will do, but we know that it's there. Apple just filed a trademark request on the iWatch in Japan, and holds about 79 patents that involve the word "wrist."
For Apple investors, the iWatch couldn't come sooner. The stock is in desperate need of some fuel to rekindle its fire. Amidst all the questions about whether or not Apple is the "innovation machine" that it once was, the company can silence critics by doing what made it #1 in the first place--putting out products that everyone wants to buy. The iWatch could be the next Apple product to do just that.
Like Google glasses, pricing will be important for the iWatch. Apple might have to accept lower margins than they have been accustomed to in the past in order to get these things flying off the shelf. Another challenge Apple faces is trying to get the iWatch on shelves in time for holiday shopping, which would provide a nice early boost for Apple's income statement, right in time for Q4 2013 earnings season.
Under Armour (NYSE: UA)
The venture into wearable tech that I'm most intrigued by, from an investor's perspective, comes from Under Armour. This one really is flying under the radar because we don't really have any meaningful timeline for when it could be announced, released, or given up on. One of the company's latest commercials (watch it here) provides us with a fascinating, but shallow, glimpse into the future of wearable tech.
The reason I'm excited for this one is because it provides Under Armour with a number of growth opportunities to expand its business. With competitor Lululemon in a transitional phase while looking for a new CEO, Under Armour has a chance to reinvent itself as a provider of technologically advanced sportswear. As more is revealed about Under Armour's plans for wearable tech, it is likely that more investors will take notice of its potential.
Apple, Google, and Under Armour recognize that wearable technology is the next frontier for the tech industry. Google will provide the catalyst for the whole industry when it goes into full launch mode and releases Google glasses. Apple's iWatch could be the company's best hope for a stock rebound, and Under Armour can open up a plethora of growth opportunities by expanding into "smart" clothing.
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Michael Gregg has no position in any stocks mentioned. The Motley Fool recommends Apple, Google, and Under Armour. The Motley Fool owns shares of Apple, Google, and Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!