A Wearables War: Can More Entrants Save Fitness Bands?

Players like Nike may be handing over fitness bands to companies such as Apple and Intel.

Apr 24, 2014 at 3:55PM

Image by Flickr user The Pug Father

Several years ago, fitness bands were the first movers in the wearables market. Nike (NYSE:NKE) and other companies used the bands -- easy to use, relatively inexpensive, and with a clear fitness-loving demographic -- in an effort to create an innovative stream of revenue where workout metrics and mobile tech merged.

Today, the fitness band sector is at a crossroads. Nike is pulling back. Fitbit is still recovering from a recall. New wearables like smartwatches and Google Glass are aiming for consumer interest. In short, the first wave of fitness bands appears to be dying down. But early reports and recent acquisitions indicate the second wave is on its way, introducing interesting new players into the market.

Nike leaving town?
Nike was faced with reports on April 21 that it had fired its FuelBand team and abandoned fitness band hardware entirely. The truth proved less drastic, but still relevant: Nike confirmed some layoffs (reportedly roughly 70 people from its 200-person Digital Sport division), but refused to acknowledge that it was shutting down its FuelBand segment. It announced a few new versions of its old FuelBands, but Nike gave no indication that it planned on producing any future generations of the fitness product.

Other reports suggested Nike may indeed be letting the FuelBand project die a quiet death by avoiding future models, leaving the market to more tech-oriented companies. Interestingly, Nike's stock reacted very little to the news, dipping briefly on the April 21 to about $73.30 before recovering to around $74 (though not to the $80 level Nike had approached earlier in the year). Perhaps the increasingly international Nike does not see the fitness band segment as particularly important.

Apple's health-focused buzz
Back in late March, there were reports of an Apple(NASDAQ:AAPL) project called "Healthbook," essentially an answer to products such as Fitbit. This wristband and app combo was reportedly designed to track heart rate, blood pressure, and blood oxygen, in addition to more traditional fitness band data such as calorie counts.

The rumors came with some presumed screenshots, and raised questions: was this is going to be just another feature of the Apple smartwatch, or a totally separate project? Perhaps Apple wants to be ready to take on similar products from competitors. Samsung has already released the Gear Fit and will market a more comprehensive fitness band called the S Band, which can track additional health factors.

Intel gets interesting with fitness band acquisition
If Intel's (NASDAQ:INTC) recent acquisition is any sign, the chip manufacturer is also interested in seizing a chunk of the fitness band market. The company bought Basis Science in March, for a theorized $100 million; with it came the Basis fitness band, created as a competitor for Jawbone, Fitbit, and other models. Basis Science drew interest because its band included an optical sensor, which allowed it to also record perspiration, heart rate, and temperature, as well as steps taken and sleep habits.

Basis will join Intel's new devices group, formed in 2013. As Intel has pushed out of its traditional semiconductor parameters, it has risen on Wall Street. First-quarter earnings recently beat analyst forecasts by a slim $0.01 per share, and although profit tumbled by 5%, overall sales were slightly up. This brought Intel's stock up to a 52-week high of $27.12, and it has been hovering around $27 since then. Investment in fitness bands could be part of a long-term strategy to move Intel products more firmly into all mobile devices and help recover some of those lost profits.

The first generation of fitness bands were novel but lacked features and depended heavily on smartphones. If Apple, Intel, Samsung, and others play their cards right, the second generation could incorporate smartwatches, add better data features, and help grow this corner of the wearables industry before it is left behind.

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Tyler Lacoma has no position in any stocks mentioned. The Motley Fool recommends Apple, Intel, and Nike. The Motley Fool owns shares of Apple, Intel, and Nike. 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.

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