The watch-style products would be made from curved glass, according to the New York Times, which cites unnamed sources "familiar with the company's explorations".
They would use Apple's iOS platform - the basis of its iPhones, iPads and iPods - and could be used to make mobile payments through the company's Passbook software, the newspaper said.
"It would fit well with what Apple is about - finding disruptive, new devices that can go global and be volume based," he told Sky News.
"A so-called iWatch would not be a radical departure from Apple’s core technologies.
"It could include GPS, music, mobile and payment functions which Apple has already developed."
He added that it would most likely be a "volume-play" product for the company - low-priced and aimed at the mass market.
According to the Wall Street Journal, Apple is in talks with its major manufacturing partner Foxconn over a watch-style device .
The Taiwan-based company has been working on a number of technologies that could be used in wearable devices, the newspaper said.
Apple declined to comment on the reports.
They come just days after an influential investor filed legal action against the tech giant, which is the most valuable company in the world.
David Einhorn, the head of hedge fund Greenlight Capital, demanded Apple hand investors some of its $137bn (£87bn) cash pile, which makes up nearly a third of its stock market value.
Apple is expected to expand beyond the smartphone and tablet market in the face of increasing competition from rivals like Samsung.
Its once rapid growth has slowed and its stock has fallen by around 35% in value since its record high in September.
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