Fitbit Buys Pebble: What It Means For Wearable Segment?

by CXOtoday News Desk    Dec 02, 2016

Fitbit Buys Pebble What It Means For Wearable Segment

Ailing smartwatch maker, Pebble had been searching for a worthy buyer of the enterprise, and reports suggest it could be Fitbit, which happens to be the largest known name in the fitness tracking equipment business, could be buying them over.

Though the exact amount for the purchase has not been officially confirmed, it is reported to be in the range of $34 to $40 million.  The news first reported by The Information reveals that Fitbit is close to buying wearable startup Pebble, and according to the terms of the deal, Fitbit will be taking over the Pebble intellectual property, which during its initial days, had received multi-million dollars in funding, from a kickstarter campaign.

Apart from the initial details available for the media, the deal will eventually ensure that the product range of Pebble is shut down as Fitbit takes the company over, especially software and intellectual property. Pebble had been struggling for a while now, and it created waves in the industry after they laid off 25percent of the workforce in 2015, and had raised $26 million in 2016, to gain finance for running the enterprise.

In what seems like an ironical situation, an unnamed source close to Pebble mentioned that Citizen, another leading smartwatch maker, was interested in buying Pebble for $740 million in 2015. Intel had then later made an offer for $70 million, which was a fraction of the Citizen offer. However, Pebble CEO, Eric Migicovsky had rejected these offers, and now the current estimates are less than half of the Intel offer. The reason being attributed is the accumulated debt which Migicovsky revealed to be close to $28 million earlier in the year.

The World of Wearables

In the world of wearables, very few players have managed to survive independently and consolidation is nothing new. Many smaller players have perished, though Fitbit in the fitness tracing segment, and Apple, in the smartwatch segment, managed to stay afloat.

According to a survey conducted by IDC in September, Fitbit turned out to be the leader in connected wearables for Q2 of 2016. Though the global market grew by over 26 percent in the last one year, Fitbit reported a drop in Q3 earnings, and ended up generating less than estimated revenue. The reasons for this are attributed the production issues related to the Flex 2 wristband, and also a softer demand for its products.

wearable

According to reports by IDC in May 2016, the largest share of the wearables market belonged to Fitbit, with 4.8 million units shipments, and a market share of 24.5percent for Q1 of 2016. This was followed by Xiaomi with 3.7 million units in sales, and enjoyed a market share of 19percent, followed by Apple who sold 1.5 million units, and had 7.5percent of the market share. Garmin came in 4th with 0.9 million units sold and held 4.6percent of the markets, and Samsung and BBK were tied at 5th position, with 0.7 million units in         sold in Q1 of 2016, and constituted 3.6percent of the world market for these companies.

In the numbers quoted above, it was clear that Pebble was not in the reckoning for being amongst the top vendors for wearables. Except for a select few, most of them failed to garner numbers, which was the case for Pebble for a while now, thus prompting the buyout action. 

The future of the wearables market

According to a report published by Forbes, which quoted CCS Insight sources, the wearables market is set to be worth $34 billion by 2020, which will include 411 million smart wearables devices. These figures obviously include a variety of products, one of which is smartwatch, apart from fitness trackers. However, the figures certainly make it clear, what the market potential is, despite having the competition there is in the market, as a lot of low-cost product makers are also a part of the competition.

Under the circumstances, with Fitbit acquires Pebble, and gets the Intellectual Property rights under its wing, it definitely ought to utilize it’s core capabilities to create products with the use of emerging technology, which would ultimately set it apart from competition.