On November 1, Google’s parent company, Alphabet, announced that it is set to acquire Fitbit for $2.1 billion, the equivalent $7.35 per share. This acquisition places Google to compete with Apple in the fitness tracker market. The acquisition will close in 2020.
“Google is an ideal partner to advance our mission,” said James Park, co-founder and CEO of Fitbit, in an announcement. “With Google’s resources and global platform, Fitbit will be able to accelerate innovation in the wearables category, scale faster, and make health even more accessible to everyone. I could not be more excited for what lies ahead.”
According to Fitbit’s announcement, Qatalyst Partners LLP acted as financial advisor to Fitbit, and Fenwick & West LLP acted as legal advisor. Qatalyst Partners, an independent investment bank offering strategic and financial advice, has helped with deals for companies, such as SimpliSafe, Glassdoor, Magento, Weebly and LinkedIn. Fenwick & West has represented Fitbit for its Initial Public Offering (IPO) and its Follow-On Public Offering. Google’s representation in the deal is unclear.
In a blog post, Rick Osterloh, Google’s SVP of Devices and Services, explains how this acquisition will help Google further its goals for Wear OS, its smartwatch software, and create technology that enhances people’s lives. “Over the years, Google has made progress with partners in this space with Wear OS and Google Fit, but we see an opportunity to invest even more in Wear OS as well as introduce Made by Google wearable devices into the market,” Osterloh said.
In January, Google announced a $40 million deal with Fossil to buy its smartwatch technology. Both acquisitions help further Google’s ‘ambient computing’ agenda; it wants users to be able to use Google everywhere and control how people are using them. Before this acquisition, Google only made its Wear OS software, it did not make its own smartwatch. Consumers could potentially see an integration of Fitbit with the Google Fit app.
For those worried what this could mean for the security of user’s data, in an announcement Google stated, “[s]imilar to our other products, with wearables, we will be transparent about the data we collect and why. We will never sell personal information to anyone. Fitbit health and wellness data will not be used for Google ads. And we will give Fitbit users the choice to review, move, or delete their data.”
A Strategy Analytics report shows that in Q4 2018, Apple had 51 percent of 18 million global smartwatch shipments. Samsung took second place at 13 percent. Smartwatch shipments grew 56 percent from 11.6 million units to 18.2 million units from Q4 2017 to Q4 2018. In 2018, a total of 45 million units were shipped. Apple’s market share declined from 67 percent in 2017 to 51 percent in Q4 2018. Samsung’s market share grew from five percent to 13 percent. Fitbit had 13 percent of market share in Q4 2018 compared to four percent in Q4 2017. Garmin held 6 percent in both Q4 2017 and Q4 2018.
Google’s Fitbit acquisition appears to be its attempt to more closely compete with Apple and Samsung as it ventures into the wearables market.
In 2019, Fitbit lowered prices on some of its wearables and launched a subscription offering called Fitbit Premium as a way to better compete in the smartwatch market. In 2015, Fitbit shares hit a record high of $51.90, however, in August shares hit a low of $2.81. Most of the time, shares hovered around seven dollars. The acquisition announcement boosted Fitbit’s stock by 16 percent and Google’s by 0.8 percent.
Advisory firm Gartner predicts a growing demand for wearables. The firm forecasted a 26 percent sales growth for wearables in 2019 and by 2022 sales will double from 2019. Consumers will have to wait and see what the wearables industry offers in the future.