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Apple's iWatch to Hit Markets in October

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Apple Inc. (AAPL) is rumored to launch its much-awaited smartwatch known as iWatch as early as Oct, 2014. Reportedly, Apple has outsourced the production of the device to a Taiwan-based company Quanta Computer Inc., which will begin production from July.

The iWatch is expected to have a rectangular display measuring near about 2.5 inches diagonally. Per sources, LG Display Co Ltd will be the sole supplier of the screen for the device’s initial batch of production.

The wearable device is believed to comprise a sensor, which in turn will enable the user to monitor his pulse. Per reports, Singapore-based sensor maker Heptagon has been approached by the iPhone maker for the development of sensors.

Moreover, it will be equipped with a touch interface coupled with wireless charging capabilities. However, the device needs to be paired with a smartphone or a tablet in order to carry out functions like texting and voice chat.

Per sources, the company expects to ship about 50 million units within the first year from its date of release in the market. However, nothing in this regard has been confirmed by Apple as yet.

It is believed that this initiative by Apple to extend its foothold into the wearable devices sector has been taken after rivals Samsung and LG ventured into the space. The wearable sector is poised to deliver robust growth with companies like Google (GOOGL) set to enter the Android Wear Platform sometime later in 2014.

Per Gartner, wearable smart electronics will emerge as a $10.0 billion industry by 2016, with the chunk of the revenue coming from athletic shoes and fitness tracking devices. In such a scenario, we believe that the wearable industry offers a huge growth opportunity for Apple.

These projections, if they materialize, will benefit Apple, which of late has been criticized due to the lack of innovative products in its pipeline. Moreover, the launch of cheaper offerings such as the recently unveiled iMac is believed to face intense competition from Lenovo and Hewlett-Packard (HPQ) which are the dominant forces in the PC market.

Although, fierce competition from Samsung remains a major headwind, we believe that the new smartphone launched by Amazon.com (AMZN) will not hurt iPhone’s growth in the near term.

Additionally, the company has shown some resurgence based on its expanded capital program, 7:1 stock split, new OS X Yosemite, iOS 8 and Healthkit. The rumored launch of iWatch will be a key growth catalyst in the long run.

Currently, Apple has a Zacks Rank # 3 (Hold).


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