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 Executive Tim 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.
An Apple spokeswoman declined to comment.
Other problems run deeper. Forrester Research analyst J.P. Gownder says the Watch isn’t useful enough. He expected more businesses to create apps like one from Starwood Hotel & Resorts Worldwide Inc. that lets customers check in, receive a room assignment and unlock a room door without stopping at the front desk.
Mr. Gownder said Apple hadn’t done enough to build a broader ecosystem of services. “Apple needs to make it an indispensable thing,” he said.
Still, the Apple Watch has fans who use it daily. According to research firm Wristly, 93% of 1,150 Apple Watch owners in an online survey last week said they were “satisfied” or “very satisfied” with the device.
In a sign of how users are personalizing their watches, Apple said in March that a third of users regularly change the bands for the Watch to match their outfits or occasion. “It’s become a part of my day,” said Dana Strom, a 31-year-old video editor from Santa Monica, Calif., who received the Watch as a gift from his wife in November. “I miss it when I don’t have it.”
He finds notifications and turn-by-turn directions useful, though he grows frustrated at times at how slowly third-party apps run on the Watch.
The Watch’s early struggles in some ways echo the iPhone, now considered a groundbreaking product that accounts for two-thirds of Apple’s revenue.
The initial model didn’t run on the then-fastest wireless network, didn’t offer third-party apps and lacked basic functions such as copying and pasting text.
As it did with the initial iPhone, Apple in March cut the price for the least-expensive version of the smaller-size Sport Watch model by $50 to $299.
Toni Sacconaghi, an analyst with Bernstein Research, estimates Apple has sold 12 million Apple Watches in the first year at an average sales price of $500. Similarly, Neil Cybart, who runs Above Avalon, a site dedicated to analysis of Apple, estimates Apple sold 13 million watches at an average price of $450.
Adam Grossman, a creator of Dark Sky, a popular weather app for the iPhone, said he made major changes for the Watch version of the app, scaling back some functions and reducing the swiping needed because of the battery and processor constraints.
However, he remains bullish on the Watch. Mr. Grossman sees parallels with the first iPod, released in 2001. Many consumers complained that the initial music player was too expensive, too bulky and had limited storage. However, as Apple delivered hardware improvements and lowered the price, the iPod became a must-have device.
“Most of the greatness that is going to come through the Apple Watch is coming in the future,” Mr. Grossman said. “Six years from now, it’s going to be weird not to have a smartwatch.”