The Strategist

Fitbit bought smartwatch manufacturer Pebble for $ 23 million

02/27/2017 - 13:29

Fitbit bought Pebble, manufacturer of smart watch, for $ 23 million, follows from the quarterly financial report, published on 22 February. Earlier media, including Bloomberg, reported that amount of the transaction could reach 40 million.

Mike Mozart
Mike Mozart
According to The Verge, it is unlikely that amount of the transaction exceeded amount of debt accumulated by Pebble in the past five years. Fitbit’s report also suggests that in 2016 the company purchased Vector, manufacturer of smart watch, for $ 15 million. Both deals, The Verge say, may be a prerequisite to the fact that Fitbit is preparing to launch sales of smart watches and applications for them in 2017. 

The company itself argues that the market of electronic accessories remains promising, and results of the quarter do not reflect real potential of Fitbit’s brand and technological platform. CEO of Fitbit James Park said that consumers tend to buy interesting and stylish smart watches with universal functionality, focused on health and fitness.

Following acquisition of Pebble and Vector, as well as contactless payments technology startup Coin, Fitbit in early 2017 announced 6% staff cuts due to falling sales. Loss of the company in the IV quarter of 2016 amounted to 146.3 million dollars against 64.2 million profit a year earlier.

Fitbit company went public in June 2015. After the IPO held in New York, stocks of the wearable gadgets producer grew to $ 50 per share, but fell in the following months, and now are traded below $ 6. From the beginning of the year, Fitbit has lost a fifth of its market value after warning that quarterly sales may sink below expectations of investors. The company also reported its intention to lay off 6% of staff and plans to reduce annual expenditure by $ 200 million. As a result of the last three months of 2016, Fitbit has spent a total of $ 38 million for purchase of Pebble and Vector Watch assets to strengthen its position in the market of smart watches.

Pebble Technologies was one of the first manufacturers of smart watches. The startup raised its first investment on Kickstarter website. The first campaign brought over $ 10 million dollars, the second - more than $ 20 million. Fundraising campaign for Pebble Time 2 and Core collected 13 million. Once Fitbit acquired the manufacturer, Pebble announced that they would no longer produce smart watches. 60% of employees will be laid off.

IDC analysts believe that there are long-term prospects on the market. Initial wave of interest in Fitbit devices is dying out; Apple Watch and Android-based devices have found their niche, yet none of the devices has become widely popular yet. According to IDC, number of electronic accessories sold worldwide in the third quarter fell by 52% - from 5.6 million to 2.7 million.

Valencell company, produces sensors and other components for electronic accessories, note that other market segments (e.g., segments of headphones, clothing, jewelry or industrial safety) still feel good even despite the falling sales of Fitbit devices.