Google’s parent company, Alphabet (NASDAQ: GOOG), could be looking to expand and improve on its wearable technology. On Monday, it was rumored that the tech company made a bid to acquire Fitbit (NASDAQ: FITB).
Known for its wearable health and fitness devices, it’s been a little bit of a struggle for Fitbit to compete with Apple’s (NASDAQ: AAPL) smartwatch over the years. And it’s not just Apple; Fitbit now competes with Fossil (NASDAQ: FOSL) and Samsung. Though Fossil doesn’t currently make its own smartwatch, it licenses Google’s Wear operating system.
Fitbit’s stock soared more than 18% on the news that Alphabet might have made an offer to acquire it. The stock ended the day up 30.5%, which added more than $330 million to its market cap.
This deal would be beneficial to both companies. It would allow Alphabet to become a major force in the wearable fitness-tracking space — a space Apple dominates, especially after the newly released version of its smartwatch.
Purchasing Fitbit would give Alphabet the opportunity to make its services more customer orientated and compete with Apple in the health and fitness space.
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According to Strategy Analytics, in 2018, Apple consumed half of the global smartwatch market in terms of units shipped. With that kind of strength from Apple, it’s been hard for Fitbit to compete. In fact, in the company’s July earnings release, it lowered its guidance for the year because of weaker-than-expected sales of its new lightweight watch.
A study from Allied Market Research indicates the smartwatch market was valued at $9,264 million in 2017 and is expected to reach $31,070 million by 2025. That’s a CAGR of 16.2% from 2018 to 2025. Additionally, IDC predicts more than 152 million wrist-worn wearables will be sold by the end of 2019, and growth will continue into the next few years. The increase could be for many different reasons, but I think one of the strongest factors is increased health awareness among consumers.
People want to live longer and healthier and are realizing they’re responsible for that. It’s up to them to take control of their lives, whether it’s being reminded by your watch to log your food or take a walk.
I wear an Apple Watch almost every day. I work in an office and I’m there five days a week for at least eight hours a day. It’s easy for me to forget to stand and get away from my desk, but the watch reminds me. It also sets health and fitness goals throughout the day — like standing for 12 hours in a day, 30 minutes of exercise, and a movement goal that accounts for calories you burn from moving around. Wearing the watch has made me more conscious of my health and more determined to meet those goals every day so I stay healthy. I believe that’s the mindset of a lot of people.
Alphabet acquiring Fitbit would open up a lot of new doors for Google, helping it improve its own operating system as well as Fitbit’s technology. Both companies have had difficulty in this market, but together they could expand their efforts and become one of the major leaders in this space.
Of course, this isn’t a done deal and the bid isn’t official just yet. But if all of this comes to fruition, Apple has some major competition coming its way.
Until next time,