Tim Cook Says Apple Watch Sales "Exceeded Expectations"

Apple Watch - H 2015
AP Images

Apple Watch - H 2015

The CEO defends early sales of the watch after independent reports call into question the device's sales performance.

As promised, Apple CEO Tim Cook revealed few details about the launch of the Apple Watch when he got on the phone with investors on Tuesday. 

The tech giant reported sales of the new smart watch as part of its "other products" category where it also reports iPod and Apple TV sales. For the third fiscal quarter, that division brought in $2.6 billion. That's up 49 percent from $1.77 billion in the same quarter last year and up 56 percent from $1.69 billion during the second fiscal quarter this year. 

During the call with investors, Apple CFO Luca Maestri noted that Apple Watch sales accounted for "well over 100 percent of the growth" in the "other products" category and "more than offset the decline of iPod and accessory sales." 

Cook cautioned investors not to look at the sequential or year-over-year change in "other products" revenue to determine Apple Watch sales because that category includes products like the iPod where sales are shrinking. 

The reason that Apple is being cagey about watch sales, Cook said, is because the company doesn't want to give its competition any insight into this new product.

But despite the lack of specifics about the Apple Watch, Cook was on the defensive about the device's early performance. He had reason to be, after a report from Slice Intelligence released July 9 estimated that Apple sold approximately 1.5 million watches in the first week following its April 10 pre-sales debut but that that number had dropped off to 2,500 watches per day. 

During the call with investors, Cook said that Apple has been "very happy with customer satisfaction and usage statistics," noting that 94 percent of Apple Watch owners wear and use it regularly, if not every day. "It's a rare and special privilege to launch a new platform with such promise and potential," he added.

When asked to give more specifics, Cook said that Apple Watch sell-through was higher than the comparable launch periods of the original iPhone and iPad. "Sales of the watch did exceed our expectations and they did so despite supply still trailing demand at the end of the quarter," he said.

The Apple Watch was not immediately made available in stores after its April 24 release because of low supply, and stores did not start receiving the product for sale until mid-June.

Cook also noted that he's not concerned about near-term sales of the watch. Instead, he said, he is focused on how the product is positioned in the long term because it's an entirely new category. "We're convinced that the watch is going to be one of the top gifts of the holiday season," he added.

Apple shares closed the day down 1 percent to $130.75 and were trading down more than 7 percent after hours on the Nasdaq.