A pair of Swatch brand watches Swatch Group

Swatch Takes on Google, Apple With New Watch OS

Switzerland’s four-century-old watch industry has been adjusting to new competition since Apple Inc. entered the territory two years ago. Is there room for a third operating system?

Swatch Group AG said it’s developing an alternative to the iOS and Android operating systems for smartwatches, with Switzerland’s largest maker of timepieces vying with Silicon Valley for control of consumers’ wrists.

The company’s Tissot brand will introduce a model around the end of 2018 that uses the Swiss-made system, which will also be able to connect small objects and wearables, Swatch CEO Nick Hayek said in an interview Thursday. The technology will need less battery power and it will protect data better, he said later at a press conference.

Switzerland’s four-century-old watch industry has been adjusting to new competition since Apple Inc. entered its territory with the Apple Watch in 2015. Hayek faces the uphill challenge of trying to outsmart Google and Apple, which have fended off would-be rivals to their operation systems in smartphones and watches. Hayek’s strategy contrasts with that of LVMH watch CEO Jean-Claude Biver, who earlier this week unveiled an upgraded TAG Heuer smartwatch the brand developed with Google and Intel Corp.

Competition from smartwatches has hurt low-end timepieces the most, and Hayek has been adding electronic functions into Swatch’s own less expensive brands such as Tissot and its namesake timepieces. This month, Swatch said it developed the world’s smallest Bluetooth chip for use in watches and household objects.

Swatch’s approach will work better because it’s trying to “think small” as one of the bigger problems for wearable devices is battery drainage, Hayek said: “There’s a possibility for wearables to develop as a consumer product, but you have to miniaturize and have an independent operating system.”

Shares of Swatch rose 1.6% as of 2:20 p.m. in Zurich, giving the company a market value of 19.4 billion francs ($19.49 billion).

“I’m not convinced,” said Luca Solca, an analyst at Exane BNP Paribas who follows the luxury industry. “People use smartwatches expecting to use the same apps they have on their mobiles. A proprietary operating system defeats the object.”

Swatch is willing to supply third parties with the operating system, which has been developed with the Swiss Center for Electronics and Microtechnology, a university specialized in miniaturization, Hayek said. The company has received about 100 requests for more information, with half coming from smaller Silicon Valley companies that don’t want to be dependent on Android and iOS, he added.

Separately, Tissot has yet to start selling its Smart Touch smartwatch, according to Francois Thiebaud, head of that brand. He said last year the solar-powered watch would be available during 2016, and that it would be connectable to Android and Apple smartphones. It also would have functions such as showing the weather and helping the wearer find lost keys.

Separately, Swatch forecast a rebound in U.S. and European markets as it published its annual report. Hayek said revenue could increase about 7% to 9% this year.

By Corinne Gretler

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