Luxury brands hedge their bets with smartwatches

Fri Mar 20, 2015 6:15pm EDT
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By Astrid Wendlandt

PARIS (Reuters) - The flurry of technology deals luxury watchmakers announced this week to tackle the Apple Watch threat are more a way to hedge their bets in case the smartwatch market takes off than a strategic U-turn.

The costs of development of these hybrid watches, combining elements of traditional watchmaking with digital know-how and wireless connectivity, will be mostly financed by the technology providers, industry specialists predicted.

Therefore, the partnerships unveiled at the Baselworld fair actually involve little investment for luxury brands - aside from their marketing efforts - but represent potentially high returns in terms of image and sales.

On Thursday, LVMH's (LVMH.PA: Quote) Tag Heuer and Bulgari, and Kering's (PRTP.PA: Quote) Gucci were among the more than dozen or so watch brands that announced partnerships with technology companies.

Regarding Tag Heuer's alliance with U.S. chip maker Intel and Google unveiled on Thursday, independent financial analyst Richard Windsor said: "I strongly suspect that Intel and Google will be putting up the majority of the development costs of the product, which is expected to be launched before the end of the year."

Few details of the watch were provided such as its functions or price, and Tag Heuer Chief Executive Jean-Claude Biver acknowledged it was not yet clear whether gaining the "Intel Inside" also meant losing the precious "Swiss Made" label.

"Swiss brands like TAG are hedging their bets – just in case 'wrist computers' become popular and they are totally out of the game," said Exane BNP Paribas analyst Luca Solca.

But while the announcement helped Tag Heuer make headlines and project the image of a brand in tune with its times, the project has many limitations, and could, in fact, fail to ever yield a product, Windsor said.   Continued...

The Tag Heuer logo is seen at the entrance of their new watch manufactory in Chevenez November 5, 2013.  REUTERS/Ruben Sprich