FINANCE

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EXHIBIT 1: SMARTWATCH MARKET, SALES PERFORMANCE

Vendor 2Q 2015 Unit Shipments*

2Q 2015 Market Share

2Q 2016 Unit Shipments*

2Q 2016 Market Share

Year-Over- Year Growth

Apple 3.6 72% 1.6 47% −55% Samsung 0.4 7% 0.6 16% 51% Lenovo 0.2 3% 0.3 9% 75% LG 0.2 4% 0.3 8% 26% Garmin 0.1 2% 0.1 4% 25% Others 0.6 11% 0.6 16% −1% Total 5.1 100% 3.5 100% −32%

Notes: *Unit shipments are in millions; the comparison refers to the second quarters (2Q) of 2016 and 2015. Source: Created by the author based on Joe Rossignol, “Apple Watch Remains Nearly Three Times as Popular as Samsung Smartwatches,” MacRumors, July 21, 2016, accessed October 19, 2016, www.macrumors.com/2016/07/21/apple-watch-vs- samsung-gear-idc-q2-2016.

EXHIBIT 2: ADOPTION FORECAST FOR SMARTWATCH OS

Smartwatch OS 2016 Units* 2016 Share 2020 Units* 2020 Share 2016–2020 CAGR watchOS 14.0 49.4% 31.0 37.6% 22% Android Wear 6.1 21.4% 28.8 35.0% 48% RTOS 1.4 5.0% 8.3 10.1% 56% Tizen 3.2 11.3% 5.4 6.6% 14% Android 1.0 3.6% 4.3 5.2% 44% Linux 0.6 2.3% 2.3 2.8% 37% Pebble OS 2.0 7.0% 2.2 2.7% 3% Total 28.3 100.0% 82.5 100.0% 31%

Notes: *Units are in millions; CAGR = compound annual growth rate; OS = operating system. Source: Created by the author based on Joe Rossignol, “Apple Watch Remains Nearly Three Times as Popular as Samsung Smartwatches,” MacRumors, July 21, 2016, accessed October 19, 2016, www.macrumors.com/2016/07/21/apple-watch-vs- samsung-gear-idc-q2-2016.

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EXHIBIT 3: APPLE WATCH VERSIONS

Category Band Case 38 mm 42 mm Price

(CAD$) Price

(CAD$)

Low Priced (Sport)

White Silver Aluminum 449 519 Blue Silver Aluminum 449 519 Green Silver Aluminum 449 519 Pink Silver Aluminum 449 519 Black Black Aluminum 449 519

Mid-Priced (Stainless Steel)

White Sport Stainless Steel 699 779 Black Sport Stainless Steel 699 779 Classic Buckle Stainless Steel 849 919 Milanese Loop Stainless Steel 849 919 Black Leather Loop Stainless Steel NA 919 Blue Leather Loop Stainless Steel NA 919 Stone Leather Loop Stainless Steel NA 919 Light Brown Leather Loop Stainless Steel NA 919 Black Modern Buckle Stainless Steel 749 NA Midnight Modern Buckle Stainless Steel 749 NA Soft Pink Modern Buckle Stainless Steel 749 NA Brown Modern Buckle Stainless Steel 749 NA Stainless Steel Link Stainless Steel 949 1,299 Space Black Stainless Steel Link Stainless Steel 1,049 1,459

High Priced

White Sport Rose Gold 10,000 15,500 Black Sport Yellow Gold 10,000 15,500 Black Classic Buckle Yellow Gold NA 19,000 Blue Classic Buckle Yellow Gold NA 19,000 Rose Grey Modern Buckle Rose Gold 22,000 NA Bright Red Modern Buckle Yellow Gold 22,000 NA

Source: Extracted from Gary Ng, “All Apple Watch Models Compared: Canadian Price Matrix [PIC],” iPhone in Canada, March 11, 2015, accessed November 19, 2017, www.iphoneincanada.ca/news/apple-watch-price-matrix-canada/.

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Page 7 9B18A005

ENDNOTES

1 This case has been written on the basis of published sources only. Consequently, the interpretation and perspectives presented in this case are not necessarily those of Apple Inc. or any of its employees. 2 Scott Anthony and Michael Putz, “The Industries Apple Could Disrupt Next,” Harvard Business Review, June 4, 2014, accessed October 9, 2016, https://hbr.org/2014/06/the-industries-apple-could-disrupt-next; Tim Bajarin, “Apple Is About to Change the Watch Industry Forever,” Time, March 23, 2015, accessed October 9, 2016, http://time.com/3754597/apple- watch-industry. 3 Mr. Playne [pseud.], “The New Apple Watch Version 2.0,” Mayge (blog), June 12, 2016, accessed October 10, 2016, http://themes.playnethemes.com/mayge/the-new-apple-watch-version-2-0; Bajarin, op. cit. 4 Adam Toobin, “Apple CEO Tim Cook Predicts Apple Watch ‘Holy Grail’ Will Be Healthcare,” Inverse, May 24, 2016, accessed September 15, 2016, www.inverse.com/article/16067-apple-ceo-tim-cook-predicts-apple-watch-holy-grail-will-be-healthcar; Tim Bradshaw, “Apple Watch Sales Fall 55% as Consumers Mark Time on Category,” Financial Times, July 21, 2016, accessed October 10, 2016, https://www.ft.com/content/3f7a0054-4f5b-11e6-8172-e39ecd3b86fc; Tayven James, “4 Reasons to Expect a Slow Start From the Apple Watch,” Wired, April 2, 2015, accessed September 15, 2016, www.wired.com/insights/2015/02/4-reasons-to-expect-a-slow-start-from-the-apple-watch; Mikey Campbell, “Study: Dissatisfied Apple Watch Owners Cite Lack of Features, But Half Will Buy Next-Gen Model,” AppleInsider, November 30, 2015, accessed October 10, 2016, http://appleinsider.com/articles/15/11/30/study-dissatisfied-apple-watch-owners-mostly- unhappy-with-performance-but-half-will-buy-next-gen-model. 5 Newley Purnell and Daisuke Wakabayashi, “Apple Looks to India for Growth,” Wall Street Journal, May 18, 2016, accessed October 10, 2016, www.wsj.com/articles/apple-looks-to-india-for-growth-1463512228; Alnoor Peermohamed, “Apple Eyes India for Future Growth,” Business Standard, April 28, 2016, accessed October 10, 2016, www.business- standard.com/article/technology/apple-eyes-india-for-future-growth-116042700162_1.html. 6 Tony Danova, “Smartwatches are the Breakout Category That Will Finally Ignite the Wearable Computing Market,” Business Insider, October 30, 2014, accessed November 23, 2016, www.businessinsider.in/Smartwatches-Are-The-Breakout- Category-That-Will-Finally-Ignite-The-Wearable-Computing-Market/articleshow/44985066.cms. 7 Forrest Stroud, “Smartwatch,” Webopedia, accessed November 23, 2016, www.webopedia.com/TERM/S/smartwatch.html; Devin Coldewey, “Pebble’s Story, From Kickstarter Sensation to Fitbit Acquisition,” December 7, 2016, TC, accessed November 16, 2017, https://techcrunch.com/timeline/pebbles-story-from-kickstarter-sensation-to-fitbit-acquisition/; Bernd Entwicklung, “The 5 Most Important Smartwatch Platforms for Developers,” CodeFlügel, September 15, 2016, accessed November 23, 2016, http://codefluegel.com/en/die-5-wichtigsten-smartwatch-plattformen-aus-der-sicht-eines-entwicklers. 8 Sophie Charara, “Apple Watch v Android Wear: The Battle for Smartwatch Supremacy,” Wareable, March 2, 2016, accessed November 23, 2016, www.wareable.com/smartwatches/android-wear-vs-apple-watch-2015. 9 Mike Murphy, “A Year After Its Launch, It’s Now Clear That Pretty Much No One Needs an Apple Watch,” Quartz, April 10, 2016, accessed October 10, 2016, http://qz.com/658010/a-year-after-its-launch-its-now-clear-that-pretty-much-no-one- needs-an-apple-watch; Apple Inc., “Apple Introduces Apple Watch Series 2, the Ultimate Device for a Healthy Life,” press release, September 7, 2016, accessed October 10, 2016, www.apple.com/newsroom/2016/09/apple-introduces-apple-watch- series-2.html; Forrest Stroud, “Apple Watch,” Webopedia, accessed October 13, 2016, www.webopedia.com/TERM/A/apple- watch.html; Michael Sawh and James Stables, “Apple Watch Series 2 Review,” Wareable, September 23, 2016, accessed October 10, 2016, www.wareable.com/apple/apple-watch-series-2-review. 10 Dana Wollman, “The Apple Watch as a Fitness Device (as Written by a Runner),” engadget, February 6, 2015, accessed October 13, 2016, www.engadget.com/2015/06/02/the-apple-watch-as-a-fitness-device. 11 Apple Inc., “Apple Introduces Apple Watch Series 2, the Ultimate Device for a Healthy Life,” press release, September 7, 2016, accessed October 13, 2016, www.apple.com/in/pr/library/2016/09/07Apple-Introduces-Apple-Watch-Series-2-The- Ultimate-Device-For-A-Healthy-Life.html. 12 Ibid. 13 “Apple Watch Series 2,” MacRumors, accessed October 13, 2016, www.macrumors.com/roundup/apple-watch; Rob LeFebvre, “13 Awesome Apple Watch Tricks That Prove It Doesn’t Need a ‘Killer App,’” Cult of Mac, April 22, 2016, accessed November 24, 2016, www.cultofmac.com/424351/12-awesome-apple-watch-tricks-that-prove-it-doesnt-need-a-killer-app. 14 Josh Smith, “29 Exciting Things You Can Do With the Apple Watch,” GottaBeMobile, September 11, 2016, accessed November 24, 2016, www.gottabemobile.com/2016/11/09/27-exciting-things-you-can-do-with-the-apple-watch; Dan Fairbanks, “Is the Apple Watch Innovative?,” Fresh, September 12, 2014, accessed January 18, 2017, www.freshconsulting.com/apple-watch-innovative. 15 Tom Nagle and John Hogan, The Strategy and Tactics of Pricing: A Guide to Growing More Profitably, 4th ed. (New Delhi: Pearson Education, 2009), 45. 16 Smith, op. cit. 17 Ibid.; Tom Rolfe, “Full Medical: How Apple Can Change Healthcare for The Better,” TapSmart, June 26, 2016, accessed January 13, 2017, www.tapsmart.com/features/full-medical-apple-can-change-healthcare-better. 18 Toobin, op. cit. 19 Isabelle Szmigin and Gordon Foxall, “Three Forms of Innovation Resistance: The Case of Retail Payment Methods,” Technovation 18, no. 6 (1998): 459–468; Tuire Kuisma, Tommi Laukkanen, and Mika Hiltunen. “Mapping the Reasons for Resistance to Internet Banking: A Means-End Approach,” International Journal of Information Management 27, no. 2 (2007): 75–85. 20 Campbell, op. cit.

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