Yesterday, AAPL formally introduced its new Watch, which “was designed with a deep reverence for fine watchmaking,” and which has “a beauty that is both timeless and thoroughly modern.”

It comes in aluminum, stainless steel and 18-karat gold versions so far.  The first costs $350;  speculation is that the last will go for $10,000+, maybe $10,000++.

Analyst and media comment has focused on three points:

–smartphones have replaced watches to some degree, particularly with younger people, so it isn’t clear how big the market is

–the Watch is fully functional only when tethered to an iPhone, so Android users need not apply, and

–AAPL now gets,say, 60% of its revenue and 75% of its operating profit from cellphones.  Whatever its success, the Watch will just be a drop in the bucket.

I think the Watch is more important than that.

I think it’s an experiment, imitating something Nokia did almost two decades ago.

In its heyday, Nokia sold a small number of luxury cellphones, initially under its own name, later under the Vertu brand (long since spun off).  Although Nokia didn’t call much attention to Vertu, it represented maybe 5% of Nokia’s unit volume but (my estimate) around 25% of its profits.

Two implications, if the high-end Watches sell well, which I expect they will:

–AAPL’s Watch profits will be much higher than is generally expected, although they will probably remain in the drop-in-the-bucket category. More important, though,

–if very upscale Watches work, meaning they amount to 5% of unit volume, why wouldn’t $10,000+ iPhones work, too?