Swatch Turns Attention to Own Timepieces Amid Apple IWatch Talk

Swatch Turns Attention to Own Timepieces Amid Apple IWatch Talk

Swatch Group AG (UHR), skeptical about Apple Inc. (AAPL)’s possible entrance into the watch industry, will attempt to turn attention back to its own timepieces at a watch fair debut this week.

The Swiss watchmaker will hold a press conference tomorrow to showcase the “latest revolutionary Swatch innovation” and mark its 30th anniversary. It will be the first time that Swatch Group brings its namesake brand of inexpensive plastic timepieces to Baselworld, the world’s biggest trade fair for watches. Until now it has only used the event to showcase higher-end brands such as Omega and Breguet.

Swatch last year introduced self-winding automatic watches, which normally cost thousands of dollars, for as little as $170. The brand may expand in that area to differentiate its collection ahead of an expected offensive by Apple in high-tech watches, said Rene Weber, an analyst at Bank Vontobel in Zurich. Apple has about 100 product designers working on a watch device that may perform some of the tasks handled by an iPhone or iPad, people familiar with the plan said in February.

“There will be something special,” Weber said of this week’s announcement from Swatch. “There’s been rumors in the direction of an iWatch, which I don’t believe. I think it’ll be something more mechanical.”Next Revolution

Chief Executive Officer Nick Hayek has said he doesn’t expect smartwatches to be the next “revolution” as consumers aren’t ready to replace iPhones with iWatches. Watches are too small to have large enough displays for many functions, and since they’re a fashion item, people like to change them rather than wear the same one all the time, he said at a March 6 press conference.

Apple entering the watch market would probably sap demand from low-end brands such as Swatch rather than from luxury Swiss timepieces, Weber said. The Cupertino, California-based computer maker may get revenue of as much as $5.7 billion within a year of selling Iwatches, while the market for timepieces is worth $56 billion, according to Sanford C. Bernstein estimates.

“The Swiss watch industry has a tendency to underestimate threats until it is perhaps too late,” said Ariel Adams, who reviews watches on ABlogtoWatch.com. He pointed to the example of how the industry almost disappeared in the 1970’s amid competition from Japanese quartz watches.

Wrist Computers

“However, the viability of wrist computers and truly mainstream smartwatches is still hampered by display, and mainly battery technology, for now,” Adams said.

Swatch Group, which makes timepieces under 18 brands, has taken three decades to reach annual revenue of 7.8 billion Swiss francs ($8.2 billion). Swatch shares have quadrupled in the past decade, while Apple stock has risen 60-fold. In the past year, Swatch has gained 29 percent while Apple dropped 28 percent.

The Swatch brand has dabbled in both higher-tech watches, which have touch screens and extra functions, as well as old- fashioned “mechanical” ones, which can wind themselves with the movement of a wearer’s wrist.

The company introduced the first watch with a curved touch- screen in 2011. They sell for $140 and the functionality is limited to setting the time, an alarm, displaying two time zones and running a chronograph.

Apple has had contacts with Swatch Group over many years about materials for products and so-called energy harvesting technology that can generate energy from physical movement, CEO Hayek said March 6.

Sony SmartWatch

The Swiss watch industry is already bracing for a slowdown this year as demand in China, the biggest watches for the timepieces, slows. Exports will probably increase 5 percent this year, Kepler’s Cox estimated last week, cutting his forecast from 7 percent. That would be the slowest pace in four years.

Swiss watch brands should embrace the move to smartwatches and join technology companies to design them, ABlogtoWatch.com’s Adams said.

“Swiss watch brands would be wise to jump in” as they could help “produce beautiful timepieces that the current smartwatch makers would never be able to do,” he said.

Sony Corp. (6758) is already selling a $129.99 SmartWatch, and may be followed by companies including Samsung Electronics Co. Microsoft Corp. (MSFT) is also working with suppliers on a touch- enabled watch, the Wall Street Journal reported April 14.

Swatch has explored ways of making watches with interactive functions for years. The company attempted to sell a timepiece that served as a mobile phone early last decade. In 2004, it formed an alliance with Redmond, Washington-based Microsoft for “Paparazzi” watches, which displayed news, weather, horoscopes and stock quotes. The product was later discontinued.

Tissot Touch

The Swatch and Tissot brands will keep developing timepieces with more interactive features, such as Bluetooth technology, Hayek said last month.

For now, Swatch Group’s more tech-savvy models include Swatches that can serve as ski-lift passes and the Tissot Touch range, which shows altitude for climbers and depth for divers.

Swatch has also grabbed bloggers’ attention and briefly fueled speculation by adding a model called the Iswatch to this year’s summer catalog.

Priced at $100, the Iswatch’s special characteristic may appeal only to watch geeks: it can tell “Internet time,” a measurement invented by the Swiss company that divides days into 1,000 “beats” — similar to the metric system –rather than hours, minutes and seconds.

To contact the reporter on this story: Thomas Mulier in Geneva at tmulier@bloomberg.net

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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