In May of 1992, Apple released a “groundbreaking and revolutionary product.” It was the Newton MessagePad.

If you don’t remember the Newton, there’s a good reason for that. By all measures, the product was an absolute flop.

The Newton was a hand-held personal digital assistant. Apple hoped it would gain adoption at a time when many people were just buying their first desktop computer.

It was an ambitious goal. But the product quickly ran into problems.

The Newton required a plastic stylus to use. The screen was a blurry black and white. And the device’s handwriting feature frequently made mistakes. It was lampooned repeatedly in comic strips and television shows.

Also, the Newton cost $900. That’s about $1,800 today when adjusting for inflation. It was an expensive, unappealing device. The product was discontinued in 1997.

I couldn’t help but think of the Newton earlier this month when I saw Apple’s latest product release.

On June 5, Apple unveiled its Vision Pro.

The augmented reality (AR) glasses overlay the digital world onto the physical world.

It’s a big leap in technology. Unlike its competitor, the Meta Quest Pro, the Vision Pro doesn’t need controllers with joysticks to navigate through apps.

Users will be able to use their favorite apps with natural hand motions.

And unlike Microsoft’s HoloLens which is meant for commercial use, the Vision Pro is made for the average consumer.

After years of setbacks and speculation, the Vision Pro is an amazing feat of engineering. I look forward to buying one when it comes out next year.

But it’s not enough to get me excited about Apple’s stock.

That’s because the Vision Pro – in its current state – will not move the share price of AAPL.

Let me explain.

Not a First Mover

When Apple releases breakthrough technology, it’s instantly recognizable.

Take the original iPhone released in 2007. People camped outside of stores for hours or even days just to be among the first to get their hands on it.

But the iPhone wasn’t the first smartphone.

The BlackBerry, LG Prada, and Palm Treo came before it.

Apple isn’t a first mover.

It lets competitors hit the market first. Meanwhile, engineers and designers work on making the best experience for customers.

The iPhone 1 didn’t have the most features. But it was the easiest and most enjoyable smartphone to use.

It was an innovation in experience. The glass touchscreen was seamless. Apps were displayed with clean, crisp lines. And the apps worked flawlessly.

That’s how it was able to steal market share away from BlackBerry

BlackBerry dominated the smartphone landscape in the early 2000s. The company once held over 50% of the United States smartphone market.

By 2013, it was down to just 5.9% of the market. And Apple held 40%.

The iPhone even cannibalized iPod sales.

That’s what innovation does.

It makes everything that came before it obsolete.

The Vision Pro isn’t there yet.

And Apple’s new “spatial reality” product has another challenge ahead of it…

Only Mass Market

Apple is not in the business of making niche products. It must dominate whichever category it enters for sales to have a meaningful impact on the stock price. Take the Apple Watch as an example.

Today, the Apple Watch holds about 52% market share for smartwatches. With such dominance, we might think Apple Watch sales are a huge driver for the stock price.

But, not really…

Apple doesn’t actually break out Apple Watch sales. The company lumps it into a category of “wearables, home, and accessories.” This category includes the Apple Watch. But it also includes the Apple TV, Beats headsets, the iPod, and other accessories. That category made up about 9% of Apple’s total revenues in the first quarter of 2023.

In other words, even though the Apple Watch is dominant, it’s not a major driver of revenue for the company.

Now, let’s look at the Vision Pro.

It costs $3,500. That’s 3.5x more expensive than the top-of-the-line iPhone 14 Pro. There was actually an audible groan from the audience at the product reveal when the price was announced.

It’s tethered to a clunky battery.

And it only has a two-hour battery life.

These are not the makings of a mass-market product. It sounds more like a niche product. And that’s not enough to move AAPL.

Apple is a $2.9 trillion company. It made $394 billion last year.

It’d have to sell 11.2 million units of Vision Pro to even grow its revenue by 10%.

I don’t expect to see lines for the Vision Pro… yet.

As I shared above, Apple’s Newton was a flop for the company. But Apple took that experience, iterated on it, and produced a far superior product, the iPhone.

In a few years, Apple may engineer a version of the Vision that is as slim as your glasses. Now that would be innovative enough to replace your iPhone.

So, credit where it is due. The Vision Pro is an engineering feat. But it’s not a reason to buy Apple’s stock today.

Until that changes, I’m focused on opportunities in AI. This week I’ve shared why I think it’s going to supercharge boring industries like banking. And why the 7% of early adopters will see a huge edge over their competition

And for readers that are worried about AI taking our jobs, next week I’m going to share why I think AI will ultimately be a net job creator.


Colin Tedards
Editor, The Bleeding Edge