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Apple Files for iWatch Trademark in Japan

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Reportedly, Apple Inc. (AAPL - Analyst Report) recently filed for a trademark for “iWatch” in Japan. According to Bloomberg, Apple has sought protection for the name, which represents a new product category of either a handheld computer or a watch.

The trademark filing further corroborates earlier rumors of Apple working on a wearable computing device. The device is similar to a wrist-watch and can handle some of the functions performed by an iPhone or iPad.

Wrist-wearable computing devices are looked upon as the next step of innovation in the high-end consumer electronics market. At All Things D’s D11 conference in May, Apple’s CEO Tim Cook said that these products could be an interesting market going forward.

Apple’s closest competitors in the smartphone hardware and software market, Samsung and Google , are keen on developing a similar kind of device. In March this year, Samsung confirmed that it is developing a wristwatch, which will have the capabilities of a smartphone.

Another major consumer electronics manufacturer, Sony (SNE - Snapshot Report) launched its much anticipated SmartWatch in 2012. The wristwatch wirelessly connects with Google’s Android-based smartphones. Sony recently unveiled SmartWatch 2, which supports near filed communication (NFC) technology.

Apple has not launched a new product since Oct 2012, while its last innovation dates back to Apr 2010 (iPad). On the other hand, Samsung continues to frequently update its entire product portfolio, which has increased its penetration across all segments of buyers (both high income and low income level) over the last one year.

In such a scenario, we believe that Apple really needs to produce something innovative such as an iWatch that could support its share price (down 25.5% year-to-date).

Although Apple revealed limited details about the product (including product specifications and probable launch date), Apple’s move to trademark the name confirms its participation in the race against Samsung. This may provide some upside to the share price in the near term.  

Additionally, Apple’s recently announced entry into the Internet-radio market is worth mentioning. Although the company faces significant competition from Pandora (P - Snapshot Report), Apple’s loyal customer base and licensing deals with leading music labels give it a significant competitive edge in our view.

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

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