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Only a few months ago, Swatch Group seemed poised to leap into the Internet Age. Engineers at the watchmaker's headquarters in Biel, Switzerland, said they had designed the wristwatch of the future -- a timepiece that could be used to log onto the Web. Nicolas G. Hayek, Swatch's flamboyant chairman and chief executive, said he would launch the Internet Swatch by yearend. It was a big step for the company, best-known for selling colorful, inexpensive plastic watches.
Maybe too big. A Swatch spokeswoman now says the Internet Swatch has been put on hold because of "technical questions." The company isn't elaborating, but judging from a prototype unveiled earlier this year, the Web watch was so flawed that it may never be put on the market. Did Swatch's boss let Internet euphoria cloud his judgment? "Hayek is an extremely good salesman, but he gets carried away by his own enthusiasm," says Frederick Hesslauer, an analyst at Bank Sal. Oppenheim in Zurich who follows the company.
At first blush, the Internet Swatch sounds like a great idea. Loaded with smart chips and a tiny radio transmitter, the watch was to have been a mobile device capable of downloading, storing, and transmitting reams of data. But to use the Internet, you need a keypad to send commands and a screen to view Web pages. The problem is how to make them big enough to use easily -- but small enough to fit on your wrist without making it too bulky to wear comfortably. It's an issue that has bedeviled Swatch before. In the early 1990s, the company designed a Dick Tracy-style wristphone, but decided not to market it because it was too big.
TIMELORD. Hayek, though, has been determined to position Swatch as an Internet leader. In 1998, he announced a push to convert the world to what he called Swatch Internet Time, a new system of measuring time that divides each day into 1,000 equal units, eliminating the need for time zones. At the same time, Hayek was pressing Swatch engineers to design a Web-enabled watch.
But what they came up with was little more than a gimmick, and a clunky one at that. Lacking a keypad and screen, the Internet Swatch must be used with a PC. The wearer passes his wrist over a mousepad, sending a signal that logs him onto the Web and lets him view his personal homepage and other data stored on a chip within the watch.
True, that could have some advantages if the user is borrowing someone else's computer. But the Internet Swatch only works with a special mousepad that the user has to tote along. Given those shortcomings, it's hard to see why anyone would choose the Internet Swatch over a Web-enabled cell phone.
WHIMSICAL. Swatch's Internet stumble is ironic because the company is known for its marketing savvy. In the 1980s, Swatch revolutionized its industry by selling whimsical $30 watches as fashion accessories. More recently, it has become a leader in the fast-growing luxury-watch business, with such brands as Omega and Longines. Overall, sales last year were up 10.9%, to $2.2 billion, and profits jumped 20%, to $258 million.
Hayek, 72, who controls 35.5% of Swatch, is gradually turning over the business to his son, who seems more interested in selling watches than in developing high-tech gizmos. For Swatch, the Internet Age may already be over.
By Carol Matlack in Paris Edited by Douglas Harbrecht
Copyright 2000, by The McGraw-Hill Companies Inc. All rights reserved.
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