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New smartwatch comes with a secret 'surprise'

GENEVA -- When Jean-Claude Biver, CEO of luxury watch maker Tag Heuer, pulls out the smartwatch the Swiss company will begin selling in November, he makes one thing clear: "We will not compete against Apple or Samsung." The reason he offers is compelling. "If we do that, we will disappear."

     Biver, who is also chairman of Hublot, another Swiss maker of high-end watches, spoke with The Nikkei recently on a wide range of topics, from China's economic slowdown (he's not worried about it), to the scandals that have plagued FIFA, soccer's governing body (he "personally trusts" its embattled president, Sepp Blatter). But it was the company's much-anticipated new timepiece that dominated the conversation.

Swiss in spirit     

While the CEO stressed that the new smartwatch was not designed to take on the likes of Apple, he did say it will offer something that rival products do not. Biver said the company will keep "the biggest surprise" top secret until the watch's launch in November.

Jean-Claude Biver

     In March, Tag Heuer announced it was partnering with U.S. tech companies Intel and Google to develop smartwatches. Biver said the new timepiece will be unveiled on Nov. 9 in New York and go on sale in 150 stores worldwide the next day. The price has been set at $1,500.

     The gadget will have most of the functions found in other other smartwatches, though voice recognition will not be among them. That capability proved an obstacle in designing a watch that was water resistant -- a characteristic the company was determined to retain, in keeping with its sporty image. 

     Biver said the new product  "looks like a normal watch, in fact like the Carrera watch," one of the company's most popular models. Both watches will share the same case and band.

     Much has been made of whether the new watch will come with the "Swiss Made" label that Tag Heuer so proudly touts. Under Swiss law, a watch must meet certain criteria to earn the "Swiss made" designation. That includes the use of Swiss movements. Tag Heuer's smartwatch will have microprocessors instead of movements.

     But Biver is not particularly worried about losing the "Swiss Made" label for its new offering. "Major Swiss brands like Omega, Rolex and Tag Heuer are already perceived as Swiss watches," he said. "The real risk is how much we pay to Intel and Google."

     There have been questions about whether cooperating with Intel and Google -- which also work with other watchmakers, including Fossil -- will erode the Swiss company's originality and core competencies. Could it follow the fate of makers of desktop and laptop computers, who largely lost out to Microsoft and Intel?

     Biver doesn't think so. He said the situation is no different than "with Swiss mechanical watches, where many brands have movements produced by Swatch Group's ETA, but each brand has its own value and market."

Chipper on China     

Perhaps a bigger challenge for Swiss watchmakers is the turbulence in the Chinese economy and surging Swiss franc. But Biver is optimistic on China, saying he's "not worried because I see things in the long term." He also said he welcomes a challenging environment -- or "resistance" -- rather than a situation where everyone grows together, because it means "only good [companies] will remain."

     There is another reason why Biver is so sanguine about China's slowdown. LVMH, the luxury brand that owns Tag Heuer and Hublot, generates only 8.6% of its watch revenue in China, compared with more than 25% in the U.S.

     Hublot has raised its prices in many markets to cope with the soaring Swiss franc. "The watches start at 23,000 francs ($23,600)," said Biver. "Raising the price to 24,500 francs does not make a big difference to a customer who is already willing to pay the initial price."

     The situation has been very different for Tag Heuer. The company used to use the dollar for its reference prices but report its results in euros. But it has since adopted the euro as its "official currency." As a result, "We were able to decrease prices, not increase them like all the others." The change has provided a tailwind for Tag Heuer's sales.

     The CEO of Swatch Group, Nick Hayek, strongly criticized Swiss National Bank for suddenly abandoning the Swiss franc's cap against the Euro in January, saying the bank had unleashed "a tsunami." Biver said he understands Hayek's anger. "I wish SNB had continued with the [cap] policy, too." But he added that the bank had no choice, and therefore he cannot blame it for its decision.

Unruffled by FIFA flap     

Hublot is a high-profile name in soccer due to its FIFA World Cup sponsorship deal, which runs through 2022. But despite the recent scandal that has rocked the sport's governing body, Biver said Hublot has not been negatively affected. "We are also a supplier, supplying time [for matches] through the [time-keeping] board,"  he said. "We are part of the game, and there is nothing wrong with the game itself."

     He said this year's women's World Cup in Canada, which took place in June and July, after FIFA President Sepp Blatter announced his intention to resign, was a big success for Hublot.  So much so, he said, that "we are ready to renew the contract."

     Some sponsors, such as Visa and McDonald's, voiced their concern about the scandal and urged FIFA to clean up its act. But Biver said he choose not to intervene because, "We don't sponsor the organization, only the games," and, like the referees, are "neutral."

     He expressed his support for Blatter, saying, "In a big organization, you cannot control everyone." He said the press has been less than fair to Blatter. "You cannot forget all the good things he has done over the years, although the media does."

     As for Blatter's decision to resign, Biver said: "If you are successful, you are successful as a team. And a boss must share the success with everyone. And for failure, you take responsibility all by yourself. That is what being a boss is about. I'm sure Blatter knows that."

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