Updated to provide additional pricing information in the fourth paragraph.
Earlier this week, I discussed how CEO Tim Cook can't afford to swing and miss on the iWatch. His detractors already believe his time is running out. But Cook must not get hasty. And if recent rumors are to be believed, Cook may, in fact, price Apple out of a potentially lucrative market.
We know Apple's margins have been on the decline. Everyone who wants a reason to avoid the stock margin erosion has been cited by . Now, couple weak pricing leverage with Cook's perceived inability to innovate, and what you have is a company on a trajectory towards obscurity - something on the level of BlackBerry (BBRY)
According to KGI Research analyst Ming-Chi Kuo, Apple could price the iWatch up to several thousand dollars. According to TheStreet's Chris Ciaccia, it could cost as much as $1,000. Cook once said that for Apple to disrupt the wearable market, the product has to be a "must-have" and not merely a "want."
The watch has been rumored to have health-related benefits, including the ability to alert wearers of a heart attack. But if it's going to cost of $1,000, it needs to also drive the person wearing it to a hospital. Although Ming-Chi Kuo does have a strong reputation for accuracy, I don't see how this price is going to work.
It's been less than a year since Apple launched the iPhone 5C. Prior to the launch, everyone had an opinion, predicting how the 5C was going to help Apple restore market-share losses to Samsung (SSNLF). This is because, unlike other iPhone versions, the 5C was expected to be more affordable. It was going to help Apple capture users in the emerging markets. Apple had other ideas.
Recall, in an efforts to preserve the company's margins, the 5C was priced only $100 less than the superior 5S. An unlocked version was north of $600. And even with a subsidy, the lower-end model exceeded $300. This wasn't going to achieve the market share gains analysts hope a cheaper iPhone would generate in emerging markets.
Tim Cook proclaimed at that point that Apple was not in the junk business. The phone was, in fact, a superior option to those offered by the likes of Samsung, Lenovo (LNVGY) and HTC at price points of $99. By Apple's own standards, the 5C has underperformed in terms of sales. There wasn't enough differentiation between the 5S. Whether or not this was by Apple's own strategy, consumers opted for the higher-end version.
We know Apple sold 51 million iPhones in the most recent quarter. Apple has not offered a breakdown of which device garners the majority of the sales, but my guess is it's not the 5C because Apple missed on the pricing structure.
Granted, it's still early. But if the iWatch does crack the $1,000 mark, in trying to preserve profit margins, Apple would have missed on this one as well. Not to mention, Samsung, which released its Galaxy Gear last December, already has first-mover status. And unless the iWatch has the ability to save lives, the device will be dead on arrival by pricing itself out of a market that is yet to be defined.
At the time of publication, the author was long AAPL and held no position in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.