Alphabet Inc., the parent company of Google, has made an offer to acquire Fitbit Inc., the US-based wearable device maker. The company is eyeing to get a piece of the crowded market for smartwatches and fitness trackers. Currently, there are no wearable offerings to be found in the market which are developed by Google, even though it has joined other major tech companies, such as Samsung Electronics Co Ltd and Apple Inc., in developing smartphones. According to sources familiar with the matter, it cannot be said with uncertainty if the negotiations between Fitbit and Google will end in a deal.
The exact price that has been quoted by Google for Fitbit couldn’t be discovered and the sources wishes to remain confidential. Neither of the companies made any comment regarding the matter. However, the news did prompt Fitbit’s share price to rise by 27%, which brought its market capitalization to a whopping $1.4 billion. Alphabet’s share price also increased by 2% and increased to $1,293.49. Even though Fitbit currently has a dominant share of the fitness tracking market, cheaper offerings from other companies like China’s Xiaomi Corp and Huawei Technologies Co Ltd are constantly chipping away at it, which could make this deal a good thing for the company.
The fitness trackers provided by Facebook monitor the calories burned, daily steps and the distance traveled. They also measure a person’s sleep duration and its quality, the floors climbed and the heart rate. The wearable device craze was pioneered by Fitbit and it has also partnered with health insurers. In an effort to diversify its revenue, the company has been making some acquisitions in the healthcare market as well. According to analysts, most of the company’s value is now associated with the health data it possesses. In July, the company had reduced its revenue forecast for 2019, citing the disappointing sales numbers of Versa Lite, which is its newly introduced cheapest smartwatch.
As compared to the $200 price tag of the full version, the cheap one has a price tag of $160. It can track heart rate and workouts, but is lacking in some features like the ability of storing music directly. In August, Fitbit announced that it had entered into a contract with the Singapore government for providing fitness trackers and services as part of a health program. The company said that they could have nearly 1 million users this way. In the same month, the company also launched its smartwatch, Versa 2.
Fitbit added Alexa, Amazon’s voice assistant, music storage and online payments to the device’s capabilities. The company is scheduled to provide its third quarter earnings report on November 6. Alphabet has already disclosed its third quarter earnings, which have missed estimates. Regardless, Fitbit is not the first deal that Google would make in the wearables sector. In January, Fossil Group Inc. said that they would sell their intellectual property concerned with smartwatch technology for $40 million to Google. It remains unclear as to what Google is planning to do with these assets.
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