The sudden interruption in most Apple Watch sales during the all-important holiday shopping season could potentially fuel another revenue decline for the tech giant’s December quarter.
Impact of a Patent Dispute
But that will depend upon how many consumers decide to rush out and quickly buy Apple Watch Series 9 and the Apple Watch Ultra 2 models, before sales are halted in the coming days due to a patent dispute. Consumers can buy both product lines on Apple Inc.’s website until Thursday, Dec. 21, and in retail locations until Dec. 24.
Offsetting Potential Lost Sales
So the question is whether a sudden run on sales in the last week of holiday shopping can offset potential lost sales. It is worth noting, though, that several large retailers had already lowered the price of the base model of the Apple Watch Series 9 by $70, to $329 from $399, and some also cut the pricier Ultra 2 model to $750 from $799.
Flat or Lower Revenue in December Quarter
Last quarter, Apple’s Chief Financial Officer Luca Maestri said overall revenue in the December quarter would be “similar” to a year ago, when Apple reported $117.1 billion in revenue, leaving the door open for flat or potentially lower revenue. After its earnings showed a fourth consecutive quarter of revenue declines, some analysts bemoaned the company’s massive size, noting that, at $89.5 billion in revenue in the fiscal fourth quarter, it was like a “massive battleship” that was “advancing only a little.”
Also read: Apple’s grim streak of revenue declines could continue into holidays.
The Apple Watch’s Growing Contribution to Apple’s Revenue
Since its introduction in 2015, the Apple Watch has become a significant contributor to Apple’s overall revenue. Although specific figures are not disclosed by Apple, the Watch falls under the wearables category, which generated $39.8 billion in revenue during fiscal 2023, representing a 3.4% decrease compared to the previous year. Analysts estimate that within this category, the Apple Watch accounted for $23.8 billion, with an additional $12.9 billion attributed to accessories ^1^.
The Sales Disruption and Patent Violation
A recent ruling by the U.S. International Trade Commission has caused disruption in the sales of Apple Watches. The commission found that Apple had violated patents related to an oxygen blood sensor owned by Masimo Corp., a medical technology company. This violation pertains to most new models of Apple smartwatches released since 2020. As a result, Apple’s shares experienced a slight decline of 0.9% on Monday, while Masimo’s shares rose by 3% ^2^.