So, Apple won't sell cheap kit? Prepare the iOS garden wall WRECKING BALL

Smartwatch will provide important clues

These tensions will be even stronger in entirely new product categories such as wearables. The field is open for a new player to define the rules for smartwatches, smart coats, smart glasses and whichever of the current gimmicks evolve into serious products.

Only a few diehard Apple loyalists will buy every product from the vendor, so mix-and-match will be more important – and that’s if the iOS experience translates attractively to wearables, which is not a given. And as the iPad shows, these newer product types can be less predictable than handsets, and generate lower volumes, because they are always additional luxuries rather than essential items.

Initially, Apple played cautiously in the wearables market. Rather than sticking to its usual integrated hardware/software approach, it has unveiled offerings like HomeKit and HealthKit – which show signs that the company does get the cloud after all, and is after providing a platform to tie together many third-party gadgets and services, rather than stay in a walled garden.

This breaks with Apple’s history, and that carries risk in itself, but it also offers hopeful signs that the company may be able to adapt to a brand new environment. The real test will be the smartwatch. Not because this is a significant product category in its own right.

Meanwhile optimists like Katy Huberty, an analyst with Morgan Stanley, forecast that Apple could sell up to 60 million watches in the first year of availability, which could generate $9bn in new revenue. This will offer valuable clues about how Apple plans to address the new form factors that may well become its chief source of hardware growth if it shies away from low cost handsets.

An iWatch will demonstrate how iOS will translate to new types of product, how Apple will balance garden walls with openness while preserving a distinctive user experience – and how, of course, new devices could expand usage and uptake of Apple services.

This will be the area investors must watch – if Apple resigns itself to lower overall market share in handsets, by staying out of the bun-fight at the low end, it must nevertheless demonstrate that it can still expand the number of devices running its platform and their level of usage.

Revenues are shifting towards services and content, and that will accelerate in the cloud era. Pundits will still obsess over hardware details, and these will be important to attract users and support a strong user experience that encourages more usage.

But the revenues will come from content deals, enterprise services (hence the IBM deal), and, of course, big data. Those can all continue to grow even if iPhone volumes do not, but only if Apple extends its platform to new form factors at the right price point.

Copyright © 2014, Wireless Watch

Wireless Watch is published by Rethink Research, a London-based IT publishing and consulting firm. This weekly newsletter delivers in-depth analysis and market research of mobile and wireless for business. Subscription details are here.