Fitbit Inc (NYSE:FIT) has been struggling. Sales of its wearables are slowing, it continues to be tied up in legal wrangles with Jawbone, it faces manufacturing challenges with its latest devices and Apple Inc. (NASDAQ:AAPL) has released a new generation of Apple Watch that’s more focused on fitness than ever. Is the answer to Fitbit’s problems a Pebble acquisition?
Because according to Financial Times, Fitbit is in “advanced talks” to buy the smartwatch pioneer.
What Would Fitbit Gain From a Pebble Acquisition?
The first question that has to be asked in this sort of situation is obvious: What would Fitbit gain from a Pebble acquisition?
That’s a tough one to answer. Pebble is a smartwatch pioneer, but the privately held company has struggled since big consumer technology companies like Apple and Samsung (OTCMKTS:SSNLF) decided to start selling smartwatches.
Pebble was a success — on Kickstarter — but its sales are a drop in the bucket compared to the numbers the big companies put out. According to IDC, in the third quarter, Pebble accounted for just 3.2% of worldwide smartwatch sales — despite market leader Apple tanking by dropping over 71% year-over-year.
A Pebble acquisition would gain the fitness wearable company a collection of new smartwatches (Pebble has recently begun rolling out a new generation of devices) and the PebbleOS operating system.
Few people are buying the smartwatches — whose primary claims to fame are low cost and long battery life due to use of an E Ink display — but PebbleOS does have developer support and a healthy collection of apps. It’s also a smartwatch platform that works with both iOS and Android.
However, Fitbit devices also work with both Android and iOS, and Fitbit’s “smart fitness watch,” the Fitbit Blaze, covers much of the smartwatch needs of most casual users, including notifications. And Fitbit already has week-long or longer battery life nailed without having to resort to the dull, low resolution display used by Pebble.
Pebble was trying to steer its smartwatch line-up into fitness tracking territory, so the reported $40 million price may ultimately boil down to cheaply eliminating a potential nuisance rival, taking on some of its key engineers and gaining ownership of Pebble’s patents.
Pebble Has Been Here Before…
The history of Pebble has been one of struggles and rumored buy-outs. Past alleged suitors have included Apple in 2013, as that company was ramping up Apple Watch development. TechCrunch reports that last year, Intel Corporation (NASDAQ:INTC) showed interest and Citizen Watch (OTCMKTS:CHCLF) offered $740 million for the company –but was turned down.
The common denominator in each of these was a company looking to fast-track smartwatch development. But now, most of the players who want to be in that market have their own platform, so Pebble’s value as an “instant in” has tanked.
A year after turning down the Citizen deal, Pebble was laying off staff, trying to raise more money on Kickstarter and is now apparently ready to sell for a small fraction of that price.
Will a Pebble Deal Boost FIT Stock?
Buying Pebble is at least making a move in the smartwatch space and at $40 million, the price is almost trivial. It seems doubtful that Fitbit will continue to manufacture Pebble smartwatches for any length of time –they aren’t exactly popular. If Fitbit can make use of Pebble’s patents and engineers and possibly incorporate some of PebbleOS into its own products, that could prove useful in competing against Apple and company, and could eventual move Fitbit stock in the right direction.
If nothing else, it gives the image that Fitbit is doing something to address its woes.
And if all the IP comes to naught, maybe the company offers Pebble watch owners a discount to buy a new Fitbit and at least recoups some customers.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.