Apple to Samsung Develop Smartwatch as Sony’s Time Passes; “Sony was ahead of its rivals to release a watch, but it takes more than an idea to create a hit product”

Apple to Samsung Develop Smartwatch as Sony’s Time Passes: Tech

With growth slowing in the $358 billion handset market, Apple Inc. (AAPL) and Samsung Electronics Co. are developing digital watches that allow users to make calls, check map coordinates, or monitor their physical activity.

They might want to talk to Tokyo-based Sony Corp. (6758), whose feature-laden SmartWatch, on sale for more than a year, isn’t mesmerizing the masses.

Priced at $130, Sony’s 1.3-inch (3.3-centimeter) touchscreen watch wirelessly connects to Android smartphones using Bluetooth technology. The gadget alerts users to calls and allows them to reply to e-mails or texts with an array of pre­written messages. It even connects to Facebook Inc. and Twitter Inc. and controls a wearer’s phone-based music library.

The SmartWatch, about the size of an iPod Nano, is a slightly smaller successor to Sony’s LiveView watch. Introduced in 2010, it had more limited features and was hobbled by kinks. The newer model is more stylish, although users can’t enter messages and it sometimes requires daily recharging and a stable connection to tell time reliably.

“Sony was ahead of its rivals to release a watch, but it takes more than an idea to create a hit product,” said Keita Wakabayashi, a Mito Securities Co. analyst in Tokyo, who rates the shares neutral plus. “It’s about bringing a product that has functionalities that people would want and marketing the product in the right way.”Limited Promotion

Technology market research firm ABI Research estimates that 1.2 million of these digital watches will be sold globally this year, generating about $370 million in sales. By 2015, ABI projects, sales will increase more than twentyfold.

Sony’s promotion of its own, however, has been tentative.

“It is an accessory for smartphones and not a product we expected a huge shipment” of, said Yu Tominaga, a Sony spokesman, who declined to say how many watches the company has sold. Sales “haven’t been bad at all.”

The company expects sales to grow as Sony and other developers add to the watch’s library of more than 200 applications. Its appeal is limited because it’s only compatible with Android devices.

Roger Kay, the president of market researcher Endpoint Technologies Associates, said the SmartWatch is too expensive for an add-on, too power-hungry and was too buggy at its introduction.

Sony’s failure to gain traction with the SmartWatch is the latest in a long line of first-mover advantages the electronics giant has squandered. The Walkman and Discman dominated the global portable music player market for decades before the advent of the iPod in 2001.

No iTunes

A year earlier, Sony began selling the Clié, a Palm OS- based personal digital assistant that allowed users to listen to music, play games and watch videos. The Clié didn’t catch on, and Sony pulled it in 2005. Despite owning the distribution rights to thousands of popular songs and films, Sony failed to rival Cupertino, California-based Apple’s iTunes for smartphones and tablets.

Sony released its first e-reader, the Portable Reader System, in 2006, a year ahead of Seattle-based Amazon.com Inc.’s Kindle. In 2009, although Sony’s e-book library carried 600,000 titles, more than twice as many as Amazon’s, the PRS didn’t resonate with consumers.

Too Inward-Looking

Shoji Nemoto, a Sony executive in charge of technology strategy, said last August that the company’s research has been too inward-looking and deliberative and should focus more on customer feedback.

“I don’t think the brand carries as much weight as it used to,” William Stofega, a program director at market researcher IDC, says of the company as a whole. “They don’t really market it as well as they should.”

Amid the setbacks at the main electronics business, which was unprofitable for a second straight year, executives will give up their bonuses. The board backed a proposal from Chief Executive Officer Kazuo Hirai that management forgo bonuses worth 30 percent to 50 percent of their annual pay in the year ended March.

Hirai pledged to revive Sony’s electronics operation by cutting 10,000 jobs and shifting away from the unprofitable television unit after he took the top job in April last year. The stock has been underperfoming Japan’s benchmark index. Sony gained 25 percent, while the Nikkei 225 Stock Average rose 48 percent over the past year as of yesterday.

Apple iWatch

The first companies to win over consumers with smartwatches could lock users into their platforms, boosting sales of phones, tablets, apps, and TVs. Apple alone has a $6 billion opportunity in its iWatch, Oliver Chen, a Citigroup Inc. analyst, estimated in March.

Other competitors include the Italian i’m Watch, which is selling a $399 smartwatch it says has access to hundreds of apps, and Pebble Technology, which has raised over $10 million on Kickstarter.com for a $150 watch compatible with both Android and Apple’s iOS.

By the end of March, Pebble had shipped almost 55,000 watches ordered over Kickstarter. Sony’s watch would benefit from heart-rate measurement and other biometric capabilities, and adds that the market leader will have to be more than an accessory, said Michael Morgan, a ABI senior analyst.

“We expect them to do things a smartphone does not,” he said.

To contact the reporters on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net; Grace Huang in Tokyo at xhuang66@bloomberg.net; Olga Kharif in Portland at okharif@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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