In a conference call with analysts in April, Apple CEO Tim Cook announced that Apple is working on "exciting new product categories."
Many Apple watchers believed Cook was talking about the long-rumored iWatch, an iOS wristband device that would serve as an iPhone accessory.
"New product categories ... implies new usage methods and usage contexts," said Horace Dediu, Apple analyst at Asymco. "This is what Apple has been doing for a few decades so there should be no surprises."
The smart watch has become a huge trend in the gadget world, with Pebble raising more than $10 million on crowdfunding site Kickstarter for its devices. Smart watches typically connect via Bluetooth to smartphones to display text messages, e-mails and other notifications. Many offer their own slate of software, including fitness applications.
Forrester's Golvin said the iWatch would "strengthen the loyalty" of some Apple customers but would not have a significant impact on Apple's total sales.
Apple has a profit margin problem, as competition ramps up and customers switch to cheaper devices. The only way out is to innovate.