Which Company Has the Most to Gain in Wearable Technology?

Google, Apple, and now Fossil will likely benefit from wearable technology, but which company has the most to gain?

Mar 22, 2014 at 4:00PM

Google (NASDAQ:GOOGL) likely had its pick of retail partners for its Android Wear line, but chose Fossil (NASDAQ:FOSL). Hence, Google has now officially beaten Apple (NASDAQ:AAPL) to the punch in this space. However, of those involved, who has the most to gain from Android Wear?

Why is wearable technology so important?
For much of the last year, Google and Apple have reportedly been in a developmental race to produce wearable technology, and many analysts believe that 2014 could be the year of its growth.

According to The Statistics Portal, the market for wearable devices last year was $2.5 billion, but will reach $12.6 billion by 2018, possibly $15 billion. Moreover, 1.6 million wearable device shipments were made last year, a number that could top 40 million worldwide in the next four years. Thus, it is easy to see why tech giants are so eager to control a large piece of the pie, and it's because of this eagerness that analysts are projecting such bright days for the wearable space.

With that said, Google has a big jump on Apple. Last year, Samsung launched Galaxy Gear with Android technology, which according to research firm Canalys, commanded a 54% market share of the wearable device market.

Historically, Google has licensed its operating system to developers, but with its Fossil partnership, the company is showing a desire to be directly involved in the monetization of wearable devices. This leads to Android Wear, a technology initially implemented with wrist watches that respond to voice, monitor health and fitness, control other Android devices, message, access news, and much more.

According to Google, the partnership with Fossil is still in the early stages of development, but with the announcement being made, it appears Google is much further along than Apple. While there have been many alleged photos of the iWatch, Apple has yet to announce anything of substance regarding the release.

Google & Apple: Which needs wearable technology?
Realistically, Apple will likely release an iWatch product this year, but with $174 billion in annual revenue, this is not currently a make-or-break industry for the tech giant. Even if the market grows to $15 billion by 2018, and if Apple (hypothetically) controlled 50% of the market, that would still account for just 4.3% of total revenue, assuming Apple produces no further growth. In reality, it's a market that Apple wants, but does not desperately need, and is not going to break a leg to enter.

For Google, wearable devices is a game-changer, although much will depend on its revenue sharing program and future collaborations. Hence, as Google partners with retail companies, let's award it a fundamentally accruable 30% share of the same $15 billion future market.

With Google's $60 billion in annual sales, wearable devices could account for 7.5% of current revenue. Clearly, that's a much larger percentage than that of Apple, and is likely why Google has been so aggressive.

The real beneficiary
The global watch industry is estimated at $60 billion, and Fossil owned just $2.5 billion of that market last year. While the watch industry accounts for nearly 80% of Fossil's business, the company still has room to grow globally, which is why it continues to grow at a pace in excess of 15% annually.

Now, with the Fossil-Google partnership, investors have to believe that this poses as a great opportunity for Fossil to collect the majority of earned revenue through watch sales. Google will likely partner with other retail companies in the future, but even if Fossil earns just 15% of this market, it would nearly double the company's current revenue in the watch industry. If so, investors can expect large annual returns in the future.

Final thoughts
This is a great match for both Fossil and Google. Fossil is an innovating brand that's always up-to-date on the latest styles and trends, which is something Google likely sought. Also, more than half of Fossil's revenue is earned outside the U.S., meaning it will give Google a global partner in regions of the world where it owns the smartphone market; this will also likely help Fossil capture more market share.

Lastly, Fossil sells leathers, jewelry, shirts, sun-glasses, etc., all of which will help Google move beyond watches and into other wearables. Combined, this equals a great opportunity for both companies, and likely large stock gains for Fossil.

Get in early on Apple's latest revolutionary device
If you thought the iPod, the iPhone, and the iPad were amazing, just wait until you see this. One hundred of Apple's top engineers are busy building one in a secret lab. And an ABI Research report predicts 485 million of them could be sold over the next decade. But you can invest in it right now... for just a fraction of the price of AAPL stock. Click here to get the full story in this eye-opening new report.

Brian Nichols owns shares of Apple. The Motley Fool recommends Apple, Fossil, and Google. The Motley Fool owns shares of Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers