In Advent of the Smartwatch, a Name That"s Been There Before

The geeky-watch niche is now drawing interest from some of the biggest names in technology. Apple trademarked “iWatch” in several countries earlier this year, which has fueled intense speculation that it is working on a wristwatch that would link with a smartphone. Samsung Electronics is expected to unveil a watch in early September that can make phone calls, play video games and send e-mails.

Last month, Sony revamped its Smartwatch, which communicates with smartphones and lets users play games or check Facebook by tapping their wrists. And a flurry of start-ups, like Pebble, are coming out with timepieces that claim to redefine what goes on the wrist.

“Suddenly, everyone’s discovered the wrist,” Kazuo Kashio, Casio’s 84-year-old chief executive, said in an interview at the company’s Tokyo headquarters. “We’ve known for a long time it’s prime real estate. We’re prepared.”

The spike in interest in wearable computing devices is shaking up the digital watch industry, catapulting a sleepy business to the cutting edge of personal technology. In the process, established digital watchmakers like Casio are finding that they must contend with new competitors.

But that is nothing new for Casio, a company with $3.06 billion in annual revenue that also makes compact cameras, musical instruments and calculators. For instance, the introduction of the smartphone, which has a better camera in every iteration, has knocked the makers of compact cameras for a loop.

Minolta exited cameras in 2006, selling its camera technology to Sony. This year, Olympus and Fujifilm each said they would drop lower-end models after plunging sales. Even heavyweights like Canon and Nikon have seen sales fall in their point-and-shoot models.

Shipments of digital cameras fell 43 percent in the first half of 2013 from a year earlier, according to the Camera and Imaging Products Association. In 2012, they dropped 15 percent.

Casio has taken a beating, too. Last year, it broke even, but analysts say its focus on lower-end, thin cameras means it will continue to lose market share. This makes their watch business even more important.

Sales in digital watches now account for 85 percent of Casio’s operating profit of approximately $206 million. But in a report earlier this year, analysts for Credit Suisse said the advantage would increasingly tilt toward companies that focus on connectivity, apps and user interfaces.

Moreover, the emerging role of the smartphone as a hub that keeps gadgets like smartwatches connected gives a distinct advantage to Apple and Google, which dominate the smartphone universe, those analysts said.

“Wearables are rapidly evolving from single-function, hard-to-connect, dumb devices to what we believe will be increasingly become multifunction, always-connected, smart/aware devices,” they said. The market for such technology — including smartwatches, fitness monitors, shoes and headsets — could jump tenfold to as much as $50 billion in the next two to three years, the report said.

An advanced digital watch that acts more like a computer is not a novel idea. The fictional British spy James Bond sported watches that were at times fitted with a scrolling LED ticker, a homing device, a microphone, a video monitor and a tiny printer for secret messages from London, not to mention lasers, Geiger counters and grappling hooks.

But in real life, success in smartwatch design has been more elusive. Citizen, Casio and other Japanese manufacturers developed calculator watches in the late 1970s, but they never took off. Casio soon emerged as a leading digital watchmaker, adding dictionaries, blood pressure sensors, a touch screen and gesture control by the late 1980s.

But after disappointing sales of many of those models — Mr. Kashio said the company was ahead of its time — Casio instead turned its attention to making the weatherproof, shatterproof G-Shock watches. The G-Shock has since won a following thanks to its retro look, low price, durability and technophile cachet.

Other watchmakers also struggled. Fossil has worked with Sony Ericsson, Microsoft and Palm to develop high-tech watches, including a 2005 personal organizer watch that came with a tiny stylus.

In 2004, Microsoft introduced the Spot watch, which would display news, weather and stock quotes via radio waves. Swatch teamed with Microsoft on the Paparazzi. Both companies have since discontinued those efforts with little to show for them.

In Advent of the Smartwatch, a Name That"s Been There Before