OK, I'm not saying Apple is building a watch. But if you follow the rumours ... that's a rumour. And it's taken serious enough to get Samsung reportedly developing an 'Android watch'.
Given that it's still a rumour, and not an announcement, here's my take on it: if Apple does build a watch, it wouldn't be 'a watch'. Just like when Apple built a phone, it wasn't a phone: it was a computation and communications device with GPS and a camera, that could also handle calls. Those who were cell-phone fixated when the first iPhone appeared found reasons to criticise it as a phone, thereby missing the point. And it will be the same with any new Apple device.
My guess is that if Apple releases a 'watch', it will actually be the new iPod shuffle or nano. Just like Apple experimented with watch-style straps for the previous little nano, and has offered various clips on the smaller iPods for a number of years for attaching to your clothing, bag or whatever takes your fancy, why not simply integrate a new tiny iPod into a a wearable - as per a watch - device? No reason at all. Especially since iPods have been in steady decline for the last few years, with most people using their iPhones for everything including as music players. Why not simply make it into a complete form factor that is wearable, waterproof and integrates into your other Apple stuff?
If so, I can almost guarantee that watch aficionados will criticise it as 'a watch'. So will some watch manufacturers - but it will be a wearable iPod with access to iPod features: songs, perhaps voice navigation and hey, if you glance at it, you know what the time is. It might even have GPS. I think this would all be very handy (or should that be 'wristy'?).
I haven't had a watch myself for ten years, but recently I bought a Swatch. It's fine, it tells the time and I like the way it looks. But it has two extra buttons besides the one that lets you change the time and date. One makes a little arm spin for 20 per cent of a little extra dial. Push it again and it does the other 40 per cent. The other just resets the little dial hand plus the minute hand exactly to 12 o'clock. I have no idea what purpose either thing serves, and the Swatch site doesn't help. The person in the shop didn't know what they were for either. Everybody else just looks at it and shrugs. This really annoys me. I do prefer understanding what things are for.
It's clear Apple can design things well. I have been looking at 'smart' watches lately - things with GPS and tracking, exercise abilities. They're often hard to use, don't support other iDevices all that well and boy, are they clunky. I mean, maybe they won't look so clunky on Arnold Schwarzenegger, but he and I don't share the same physiques. In fact, I'm pretty sure he has at least two of my physiques. Combined. Plus muscles.