How was the Watch a "huge and very expensive misstep"? The analyst estimates I've seen point to them having sold over ten million units at > $250 each. That would make it a multi billion dollar business.
Perhaps opportunity cost. Apple has limited design and engineering resources (seemly at least partially by intent) so they've had to sacrifice in other areas to develop the watch, and so far only seen modest returns.
Modest returns by whose estimates, IDC? And under their functional structure, theoretically Apple is able to shift resources to projects and collaborate better where they need to. If they needed to shift resources from other teams to launch a multibillion dollar Smartwatch business, that's great, you won't hear shareholders complaining. Keep in mind in the last 9 years Apple has launched/revived 3 multibillion dollar hardware industries - Smartphones, Smartwatches & Tablets. Google meanwhile, is struggling to launch a billion dollar business with $1B+ revenue potential like they have in their cashcow in search advertising. Heck how long have they been at it with their "other bets" now and its still a big money loser?
Modest compared to $160B in iPhone revenue. I'm not sure I agree with parent, but on the other hand as a Mac user, the quality of the last couple OS releases does lead me to believe they are stretched a bit thin.
The top of the article your commenting on puts the number at 18M. The vast majority of those would've been sold at $350+, so even being highly conservative, $300*18M = $5.4 billion in 18 months.