Google Buys Wearables Company Fitbit for $2.1bln

Google Buys Wearables Company Fitbit for $2.1bln
November 4, 2019

 

Google holding company Alphabet Inc (Nasdaq: GOOG) announced on Friday that it is acquiring Fitbit (NYSE: FIT), a wearables company, in a deal valued at roughly $2.10 billion or $7.35 per share. The takeover pits Google against tech giant Apple in the fitness tracking domain. Following the news, Google closed Friday at $1,273.74, up $13.63 or 1.08% from the prior close, while Fitbit finished trading at $7.14, up $0.96 or 15.53% from the previous day’s close.

The acquisition follows Reuters’ report last Monday, revealing that Google’s parent company Alphabet was in negotiations to take over Fitbit. While announcing the acquisition through a blog post, Google SVP of devices and services Rick Osterloh stated that Fitbit acquisition is “an opportunity to invest even more in Wear OS as well as introduce Made by Google wearable devices into the market.” The acquisition is anticipated to be completed sometime next year, subject to shareholder and regulatory approvals. Following the acquisition, Fitbit will come under the umbrella of Google.

Fitbit CEO James Park elaborated on how the company is close to achieving its vision and the benefits of staying under Google. Park said: “More than 12 years ago, we set an audacious company vision – to make everyone in the world healthier. Today, I’m incredibly proud of what we’ve achieved towards reaching that goal. We have built a trusted brand that supports more than 28 million active users around the globe who rely on our products to live a healthier, more active life. Google is an ideal partner to advance our mission. 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.”

Notably, this could be the best way forward for Fitbit, which is facing heavy competition from the likes of Xiaomi, Huawei, and Apple. The Chinese companies are offering similar products at dirt cheap prices. The company is also finding it difficult to make inroads in the smartwatch domain, and the probability of reigning over Apple, which offers advanced features, is virtually zero. Apple’s products also come with the advantage of easy integration with other gadgets. By the end of 2018, Apple had already garnered roughly 50% of the global smartwatch market in terms of shipped volume, as per Strategy Analytics. Fearing further loss of market share, Fitbit has already slashed its outlook for 2019 in its July-quarter earnings release. Fitbit has acknowledged that the newly launched lightweight watch is not faring as per expectations.

Google does not manufacture smartwatches. On the other hand, the search engine giant is currently licensing its Wear operating system to firms such as Fossil. In fact, Google went to the extent of purchasing intellectual property from Fossil for $40 million in January 2019. Therefore, Google sees value in Fitbit. By taking over Fitbit, Google will have its hands on valuable intellectual property of Fitbit in the form of health-related data. Google, so far, has not succeeded in making a significant impact in the wearables market.

Furthermore, Google had clearly mentioned that “ambient computing” is its hardware strategy. This implies users will have no issues in accessing its services anywhere. Acquiring Fitbit will enable Google to match Apple in the health and fitness domain. To achieve the objective, the company hired David Feinberg, ex-CEO of Geisinger Health, to strengthen its health-care strategy.

Fitbit, which has seen its stock lose more than 80% of value since its IPO in 2015, will gain access to Google’s exemplary software abilities that will enable the company to improve the performance of its smartwatches such as the Versa. Google will also be able to assist Fitbit in achieving better software integration with Android gadgets. Therefore, the acquisition is expected to keep the stock of Google and, more importantly, that of Fitbit bullish in the short-term.

Technically, the stock has broken above the resistance at 1167. Additionally, the stochastic oscillator is also in the bullish region. As a result, we can expect the rally to continue in the near-term.

goo - technical analysis - 4th Nov 2019

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Ian Maguire

Ian Maguire

Ian is our resident contributor to the latest going ons in the cryptomarket, keeping up to date with the latest icos and coins


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