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Smartwatches: Why They’re Not the New Smartphone

Daily Ticker

As tech enthusiasts jam the blogosphere with the latest rumors about Apple’s (AAPL) big event next Tuesday, two major tech companies released their own gadgets this week: Samsung’s Galaxy Gear smartwatch and Qualcomm’s (QCOM) Toq watch.

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These wearable devices work with Android phones (right now the Galaxy Gear can only be used with the Galaxy Note 3) and both are expected to put more pressure on Apple to join the growing smartwatch market. The Galaxy Gear will be available to U.S. consumers in October and will retail for $299. It includes a 1.9 megapixel camera, a 1.63-inch AMOLED display and is powered by an 800MHz processor. The watch’s strap is made of rubber and consumers can choose from six different colors.

Qualcomm said its Toq will not be mass-produced and will be sold in limited quantities to U.S. retailers. The device will be priced in the $300 to $350 range and it features wireless headphones, wireless charging and a longer battery life (the Toq’s screen uses reflective technology that works in bright light and saves power).

BTIG analyst Walt Piecyk says there is demand for smartwatch devices but they won’t be a major source of revenue for technology companies.

“The real profit center for any company is in the phones,” he tells The Daily Ticker. “The profits on these high-end phones are what drives earnings. [A smartwatch] is a way for companies to differentiate themselves.”

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Piecyk, who was invited to attend Apple’s exclusive event in Cupertino, Calif., next week, says he would be more inclined to wear Google (GOOG) Glass than a smartwatch.

“I don’t typically wear watches,” he admits. “That’s what my phone is for.”

Piecyk is echoing the sentiments of The Daily Ticker's Henry Blodget who said earlier this week about smartwatches: “I don’t get it. What is this going to do that is so great and new?” We'll see if consumers respond in a similar way.

According to Juniper Research, shipments of app-enabled smartwatches will hit 1 million this year and increase to 36 million by 2018.

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