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New Signs of Weakness in the Wearables Market

Fitbit close to acquiring Pebble, signaling consolidation

December 2, 2016 | Mobile

Fitbit reportedly is close to acquiring smart watch maker Pebble, a sign of a contracting wearables market where multiple players are struggling to keep afloat.

Top 5 Smart Watch Brands Worldwide, Ranked by Shipments, Q3 2015 & Q3 2016 (millions and % change)

The deal was first reported by tech news site The Information.

Fitbit is purchasing the company for $34 to $40 million, according to Engadget, and it doesn’t look like the purchase price will cover all of Pebble’s debts. Earlier this year, Pebble laid off 25% of its workforce.

Pebble introduced its smart watch in 2012 via a Kickstarter campaign and it has continued to rely on Kickstarter to drive interest in its other version, Pebble 2. Currently, the campaign has more than 66,000 backers and has raised nearly $12.7 million—its goal was $1 million. Those devices are still expected to ship, but will probably be the last ones from the company, as Fitbit isn’t planning to buy Pebble for its hardware, just its technology.

“Fitbit’s interest in acquiring Pebble is likely an attempt to address a couple of concerns,” said Cathy Boyle, principal analyst at eMarketer. “Fitness trackers such as the Fitbit suffer from the same problem as in-home fitness equipment—people buy these products with the intention of improving their health, but they stop using them quickly.”

Earlier this year, Pebble released new versions of its smart watches and a new product called Pebble Core, which has been described as a tiny computer. The technology in these devices enables them to more precisely track users’ heart rates and perform a list of tasks beyond fitness tracking, including listening to music, calling a cab or checking the weather. If Fitbit can integrate this technology into its existing fitness bands, it could increase usage of the devices, avoiding the abandonment issues that have hurt fitness tracker sales.

Pebble isn’t the only company struggling. Last month, Microsoft killed its fitness tracker, Band 2. And Jawbone, another wearable maker, reportedly halted production earlier this year and was seeking a buyer. Business Insider also reported that Motorola is putting its smart watch plans on hold.

Overall the sector is struggling. Smart watch shipments plummeted in the third quarter, according to IDC, falling more than 50% year over year. Apple, the biggest player, saw shipments shrink by 71.6%, from 3.9 million units to 1.1 million units.

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