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5 Companies To Watch As Smartwatch Rumors Circulate

Stocks in this article: AAPL GES GOOG KORS LPL SNE

Chris Lau, Kapitall Contributor:  Ever since rumors circulated that Apple (AAPL) would develop an iWatch, additional rumors about a “smartwatch” circulated. In truth, the smartwatch is not entirely new: Sony (SNE) already has one on the market. Sales for the Sony smartwatch are likely weak, due partly to bad reviews, even from sites covering Android news . [More Analysis by Chris Lau:  The Pros and Cons of Microsoft's Mobile Strategy]

Google (GOOG) could possibly announce an Android watch on May 15 at the Google I/O developer’s conference.

Apple could have an iWatch on the market. Even though a search for “Apple iWatch” yields 3.12 million results on Google search, this rumor has yet to be confirmed.

Analysis

Consumer interest in watches is declining, since nearly all smartphones have a clock app that makes watches unnecessary. The drop hurts brand names, but companies like Guess (GES) and Michael Kors Holdings (KORS) sell other products besides watches. This time around, the release of a smartwatch to market could hurt watch sales. Shares in both companies are down as investors worry about overall declines in spending:

A smartwatch revolution could take hold, if computerworld’s myth-busting turns out to be true. Some of the 8 myths are:

Myth #1: There won't be a smartwatch revolution.

Myth #2: Smartwatches will fail because nobody wears watches anymore.

Myth #3: Smartwatches are for people too lazy to take the phone out of their pockets.

Myth #4: Smartwatches are bulky.

Companies that could find new sources for revenue include Apple, Sony, and Google. LG (LPL) is also said to be making a smartwatch. Samsung is reportedly working on a smartwatch, too.

Conclusions

The revolution for mobile devices is moderating, with growth limited in the phone and tablet space. Talk of a smartwatch could be an added source of growth, but investors should not expect sales to be strong. Consequently, investors should not assign a higher multiple for companies reportedly making a smartwatch.

Written by Chris Lau, Kapitall Contributor

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