It's clear that they spent a large amount of time and effort with the haptic feedback and the crown.

But functionality wise... well I completely agree with you.

I can't see anything a smartphone cannot do, better and more efficiently, with the exception of the heart rate sensor.

Some functions in particular seem very awkward to me: I cannot see a reasonable way of using it as a phone or an audio player, in public, without bluetooth earphones.

With mobile phones, mp3 players and smartphones the value proposition was clear, but what is the killer application for smartwatches ?

That said, I would be far from surprised if they sell like hotcakes.