Google is paying $7.35 per share for Fitbit, a wearables company, in an all-cash deal that values Fitbit at $2.1 billion. This is a great move for Google; simply, it will accelerate its capacity to have solid competitive presence in the wearables sub-sector of mobility. For Fitbit, this is a hard landing for a company that previously showed signs of promises, as high as $51.90 per share, before it began to dim.
Relatively speaking, this is a great landing for Fitbit . The company’s price has fluctuated significantly as it worked to adjust to a changing market and fumbled on some of its more recent launches. In summer 2015, it hit an all-time high of $51.90, but this August it went as low as $2.81 after more than two years hovering below $7 — a pattern that changed dramatically after the first reports of Google’s interest began to surface in September.
Yet, the reason why Fitbit did not thrive, on market valuation, was not really due to any market failure in the wearables pioneer, rather, it was because of ICT utilities like Google and Apple. Largely, irrespective of what Fitbit does, investors will remain nervous that one tweet from Apple or Google could annihilate the company.
With that mindset, most have stayed out of the game, looking from outside. That construct is the reason why companies that do things which Apple or Google could do in the near-term will continue to struggle in public markets. Yes, they would remain suspects because of the shadows of the ICT utilities. No matter how you look at it, Fitbit has no chance!
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Google is buying Fitbit for $2.1 billion. In this piece, I explain the challenge before companies that do things which are close to what Apple, Amazon or Google (the ICT utilities) may have interests in the near future. Fitbit did not fail as a technology company, Fitbit failed as a “value company” because most investors never felt comfortable buying it, because of the concern that Apple or Google could simply decide to begin doing whatever Fitbit is doing. Under the shadows of these ICT utilities, most promising companies will struggle, and that is a huge challenge in our contemporary technology time. (LinkedIn summary)
The acquisition announcement
Helping more people with wearables: Google to acquire Fitbit
Today, we’re announcing that Google has entered into a definitive agreement to acquire Fitbit, a leading wearables brand.
We believe technology is at its best when it can fade into the background, assisting you throughout your day whenever you need it. Wearable devices, like smartwatches and fitness trackers, do just that—you can easily see where your next meeting is with just a glance of an eye or monitor your daily activity right from your wrist.
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. Fitbit has been a true pioneer in the industry and has created engaging products, experiences and a vibrant community of users. By working closely with Fitbit’s team of experts, and bringing together the best AI, software and hardware, we can help spur innovation in wearables and build products to benefit even more people around the world.
Google aspires to create tools that help people enhance their knowledge, success, health and happiness. This goal is closely aligned with Fitbit’s long-time focus on wellness and helping people live healthier, more active lives. But to get this right, privacy and security are paramount. When you use our products, you’re trusting Google with your information. We understand this is a big responsibility and we work hard to protect your information, put you in control and give you transparency about your data. Similar 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.
Three and a half years ago, I joined Google to create compelling consumer devices and services for people around the world. Our hardware business is still relatively young, but we’ve built a strong foundation of capabilities and products, including Pixel smartphones and Pixelbooks, Nest family of devices for the home, and more. Google also remains committed to Wear OS and our ecosystem partners, and we plan to work closely with Fitbit to combine the best of our respective smartwatch and fitness tracker platforms. Looking ahead, we’re inspired by the opportunity to team with Fitbit to help more people with wearables.
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The future convergence where only few supermajors control larger market share is circling in, and the small players cannot really do much to slow down the speed. It happened few decades ago in the industrial space, the Oil majors also had their time; it’s now time for tech majors to do theirs.
Apple just launched its streaming services, and the argument is already trending on whether it really needs to spend time developing original contents or to simply buy any promising start-up in that space; with hundreds of millions of iPhones on people’s hands already, Netflix and Amazon would be put on notice…
But all hope is not lost: you can create and sell to them once the heat becomes too much, or you make sure you have a stake in those supermajors. What will not solve anything is to sit down and keep whining, or suggesting that tearing down the big guys is way to go. The competition is global, if you tear down your leading corporations, then you go to back of the queue to start afresh.
Another lesson on why nations and companies must focus on where they have competitive advantage, the idea of seeing diversification from the lens of unlimited potentials is already obsolete; just pick few things and remain unbeatable in them.