The iPhone and iPad maker desperately needs a major new hit to reassure investors that the company still has the ability to create new device categories that will replicate its massive successes in smartphones and tablet computers.
"This can be a 6-billion-dollar opportunity for Apple, with plenty of opportunity for upside if they create something totally new like they did with the iPod - something consumers didn't even know they needed," said Citigroup analyst Oliver Chen, who studies luxury goods retailers.
The report said that Apple has a team of 100 designers and engineers working on the device.
Features under consideration include letting users make calls, see the identity of incoming callers and check map coordinates. It would house a pedometre for counting steps and sensors for monitoring health-related data, such as heart rate, according to people familiar with the plans.//DPA