Microsoft (NASDAQ:MSFT) was too late -- and perhaps not cool enough -- to make a dent in the fitness tracker market. ZDnet is reporting that the software giant is discontinuing Microsoft Band, the wearable tech bracelet that was introduced two years ago.
Microsoft stopped selling Band 2 -- the second generation of the bracelet -- from its official online store earlier this week. Clicking on the "Buy Now" button simply takes you to a page directing you to third-party retailers that may still be stocking unsold wrist huggers.
Mr. Softy isn't publicly conceding defeat.
"We have sold through our existing Band 2 inventory and have no plans to release another Band device this year," Microsoft confirmed to ZDnet.
This may seem to open the door for Microsoft Band 3, but you don't stop selling a product without having a replacement in place and get away with it. Along with rumors of layoffs within the device's product team, it's safe to write the obituary for Microsoft's two-year run in the realm of fitness trackers dominated by Fitbit (NYSE:FIT).
Microsoft can retreat, of course, or it can do what it has done in the past and buy its way into relevance by nabbing a market leader.
An unlikely buyout candidate
Fitbit isn't for sale, but that doesn't mean it can't be bought. There wasn't a "For Sale" sign hanging on Skype, Yammer, and more recently LinkedIn (NYSE:LNKD.DL) when Microsoft cracked open its huge pocketbook to snap up niche leaders. This makes Fitbit a logical target for a company with a history of multi-billion dollar purchases and a market leader that is attainable. Fitbit's present enterprise value of $2.5 billion would be a light bite for Microsoft, even with a reasonable premium on top of that.
Microsoft can run away from the fitness bracelet market. Even as it discontinues Microsoft Band it can still carve out a role in wearable tech. However, it wouldn't cost a lot to go from a walk of shame to the hall of fame in this still booming market.
Microsoft has to settle to be a distant third in mobile operating systems because it can't buy the companies behind the Android and iOS category killers. Fitness trackers are nowhere near as lucrative as mobile. There's a reason why Fitbit's commanding an enterprise value of just $2.5 billion. However, Microsoft is a company with a history of buying the winner instead of leaving as the loser.
Fitbit isn't perfect. Growth has slowed. Margins are getting squeezed. There's a lot of pressure to innovate since new products continue to make up the lion's share of its sales. However, the company that's selling millions of wearable tech gadgets every quarter would look good on Microsoft's arm.
Rick Munarriz owns shares of Fitbit and Microsoft. The Motley Fool owns shares of and recommends Fitbit. The Motley Fool owns shares of LinkedIn and Microsoft. 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.