Wearables smothering Swiss watch business, Fossil CEO says

"I think technology and the whole idea of wearables ... has taken some of the oxygen out of the Swiss business," Fossil CEO Kosta Kartsotis told analysts Tuesday on a call to discuss the watch maker's second quarter results.

Without mentioning Apple or its smartwatch by name, Kartsotis implied the arrival of tech companies in the fashion world means the industry needs to incorporate technology into its products to stay trendy.

"We also see technology emerging as the latest trend in fashion, with the growing interest in wearable technology inspiring new entrants into the watch space," he said.

These new competitors, along with other factors like a strong U.S. dollar, contributed to Fossil's quarterly revenue decline, Kartsotis said. For the quarter ending July 4, Fossil recorded revenue of US$740 million versus $773 million for the year-ago period.

The Apple Watch, meanwhile, went on sale during that time frame. Starting in April, the wearable could be ordered only from Apple's website before the company began carrying the watch in its stores in June.

It is unclear what impact smartwatches will have on the sale of analog timepieces. Some analysts predict that consumers are more inclined to purchase sensor-equipped devices that do more than tell time. Last week, a report from market research firm NPD Group claimed the Apple Watch was partially behind the largest slump in U.S. watch sales since 2008.

Fossil sees wearables as a key component of the industry's future and the company is developing three product categories around the technology.

First, there are smartwatches, like the Android Wear model Fossil is planning on launching in October or November, Kartsotis said. When Google announced its OS for wearables last March, Fossil was listed as a partner that would make watches running Android Wear.

Since then, not much has been heard about the effort. Fossil, though, has said development is taking longer than anticipated, and that the watch will include Intel sensors.

Kartsotis also predicted wearables will spawn a device category akin to jewelry, such as bracelets, which lack the displays found on smartwatches.

The final category, which Kartsotis labelled "smarter watches," will have the greatest long-term impact at Fossil. These devices will be existing analog watches with sensors added to perform functions like tracking activity and sleep, he said. Fossil is on track to release those watches this year, Kartsotis added.

Some day, every watch Fossil makes could have technology in it, he said.

In addition to meeting market demand, incorporating technology into its watches gives Fossil access to user data that can be fed into the company's CRM software and used for marketing efforts, Kartsotis said.

Fred O'Connor writes about IT careers and health IT for The IDG News Service. Follow Fred on Twitter at @fredjoconnor. Fred's e-mail address is fred_o'connor@idg.com