Apple’s Watch Outpaced the iPhone in First Year

Apple Inc. sold twice as many Watches as iPhones in each device’s debut year. Yet the smartwatch is dogged by a perception that seems premature given the history of Apple’s most popular devices: disappointment.

As the Watch marks its first anniversary on Sunday—two days before Apple’s quarterly earnings announcement—the product’s fate is critical to the company. It is Apple’s first all-new product since the iPad and a test of its ability to innovate under Chief ExecutiveTim Cook, when sales of iPhones are slowing.

​So far, the numbers appear solid. Apple doesn’t disclose sales, but analysts estimate about 12 million Watches were sold in year one. At an estimated average price of $500, that is a $6 billion business—three times the annual revenue of activity tracker Fitbit Inc.

By comparison, Apple sold roughly six million iPhones in its first year. As a new entrant, the Watch accounted for about 61% of global smartwatch sales last year, according to researcher IDC.

And yet, there are detractors such as Fred Wilson, co-founder of venture-capital firm Union Square Ventures, in December declared the Watch a “flop.” Mr. Wilson, who owns shares of Fitbit through a fund, had earlier predicted the Watch wouldn’t be a “home run” like the iPad, iPhone and iPod, saying many people wouldn’t want to wear a computer on their wrist.

The Watch has shortcomings. It is slow, with an underpowered processor that is throttled at times to extend the device’s battery life. It lacks mobile and Global Positioning System connections, meaning it must be accompanied by an iPhone, limiting its usefulness as an independent device. The battery needs to be charged every day.

Perhaps the biggest challenge is the Watch’s lack of a defining purpose. It does certain things well, such as activity tracking, mobile payments and notifications. But there is no task the Apple Watch handles that can’t be done by an iPhone or a less-expensive activity tracker.

Joshua Stein, a 33-year-old app developer in Chicago, said he bought a Watch shortly after its release, but found the software slow and thought it was inconvenient having to charge it each night. In January, he sold the Watch on eBay and returned to using a $150 Pebble smartwatch with a longer-lasting battery.

“Basically, I didn’t use it that much,” said Mr. Stein. “The functionality of the Watch is still pretty limited.”

There are relatively easy fixes for some concerns. Apple is working on adding cell-network connectivity and a faster processor to its next-generation Watch, according to people familiar with the matter.

DAISUKE WAKABAYASHI

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