Fitbit is buying rival wearable device maker Pebble for an undisclosed amount, reports the Verge. The deal will include Fitbit taking Pebble’s intellectual property, including its operating system, and will phase out the Pebble brand. According to TechCrunch, the deal is worth $40 million, although there are no details on when it will be completed.
Interestingly, the same TC report mentions that watchmaker Citizen wanted to purchase Pebble for $740 million in 2015, and was subsequently offered a $70 million deal by Intel. However, both deals were refused by CEO Eric Migicovsky. Pebble was founded in 2009 on the back of a successful Kickstarter campaign that saw the company raise around $10 million. It subsequently raised $20.3 million from the same platform in 2015 for the launch of Pebble Time and Time Steel.
This is the first big consolidation in the wearables space, an industry that hasn’t taken off as well as it was expected. In 2015, for example, 78.1 million wearables were sold, with 2016 estimate sales hovering around 102 million. In contrast, 1.422 billion smartphones and 206.8 million tablets were sold in 2015. As such, exclusive wearables makers have not done so well – Fitbit which had priced its shares at $50 on the NYE in 2015, currently trades for $8.4, while Pebble had to raise $28 million in debt and venture financing and let 40 of its staff go due to lack of funds.
With this acquisition, Fitbit will not only get rid of its closest competitor, it will also provide it with Pebble’s team and intellectual property, including hardware, software & the Pebble app store. This will help Fitbit develop new features, and possibly integrate a new app store with its own devices. However, it might not be enough, and the company might still find it difficult to match the R&D investments and loss absorption capacity of bigger competitors in the space like Apple, Samsung and Google. Note that Fitbit and Pebble both sell devices in India, and compete with wearable makers like GOQii, Xiaomi etc.