Google's (GOOG) computer glasses, called Glass, are getting safety and privacy experts tied in knots. Rightly so, but the product is probably the best advance in technology sinceApple's iPad.
From distracting to disturbing
The critiques of Google's Glass all have merit. For example, someone paying more attention to the images displayed on their glasses could easily walk across a street and get hit by a car. However, that the same thing happens today with cell phones. Privacy is also an issue, since Glass is capable of capturing audio and images. Those questioning Glass' fashion statement, meanwhile, should take a look at such one-time necessities as bell bottoms, hoop skirts, and wigs.
The best advance
Despite the concerns, Google's Glass is probably the best new device to hit the market since the iPad. This is true because it moves the technology needle in a way that challenges and changes the status quo. It takes computers from being a device we carry to one that is integrated unobtrusively into our lifestyle.
Apple's rumored iWatch simply doesn't provide that type of benefit. It's likely to be little more than a cell phone accessory. And, it suffers from just as many social and ethical drawbacks as Glass. If Apple does come out with an iWatch, it is more of a statement about the difficulty the company has had finding the next big thing.
A company in need
That could be a big problem for Apple since the company either needs a hot new tech gadget or new customers to maintain its current rate of revenue growth. The iWatch just doesn't seem like the type of toy that's going to push the accelerator. That said, top and bottom line growth have yet to falter, so the company probably has time to weather a few product gaffes along the way to the next big release.
Apple shares are still well off their highs and now offer investors a dividend yield of around 2.70%. The wildly profitable company is probably a good option for growth and income investors, particularly since a massive share buyback is in the works. And, if the iWatch flops, Apple could easily play me-too with glasses of its own.
Google shares, meanwhile, are trading near all time highs. That's an interesting situation since the company's profit margins have been contracting lately, falling about 10 percentage points in two years. Management warned in the last annual report that it doesn't make as much from mobile ads as it does from online ads. Since mobile is where customers are going, margin pressure is likely to heat up, not cool down.
So, Glass could be an important product for Google. If it catches on, the company's shares might have more room to run. It would also get the company into the device market, a segment it has yet to break into despite repeated efforts. Although making and selling physical products might not help margins, a hot product would help top line growth.
With the share price so high, investors should consider pulling some money off the table here. That said, watch the progress of Glass. Early adopters aren't enough, however, it needs to be a mass market success if it is going to be a long-term winner.
Not the only game in town
Interestingly, Glass isn't the only game in town. A small Japanese startup is working on a similar product called Telepathy. While you can compare and contrast all you want, the trend is increasingly obvious. Other big-name companies will quickly follow along.
For example, Samsung is less innovator than improver. The big difference, however, is that Samsung has been more willing to broaden its product portfolio than main competitor Apple.
Thus, Samsung offered small tablets before Apple. Apple eventually got there, but wasn't the first mover in the space. So while Samsung has been rumored to be working on a watch like Apple, it isn't too much of a stretch to believe that it is also working on eyeglass devices, too. Apple, meanwhile, is more likely to dismiss the idea until it's proven in the market.
Like Apple, Samsung has seen its top and bottom lines advance on the strength of smartphone and tablet demand. Its shares are off from their highs, but are still priced for perfection. Investors should probably take some profits. However, if Glass takes off, look for Samsung to beat Apple to market with a similar product and be the first to benefit.
Google Glass takes society in a new direction in a way that a watch doesn't. That's a scary thing, but potentially transformational. Investors looking at wearable computers should be paying attention to Glass. It could help keep the top line growing at Google. If me-too products hit the market, expect Samsung to be a prime player, too.