There you have it, folks.
The total price tag for Fitbit's (FIT +0.00%) two smartwatch-related acquisitions completed in recent months was $38 million. Of that, $23 million went to Pebble, which jibes with prior reports that the total cost was "less than $40 million." Fitbit did not disclose the financial terms at the time of acquisition. Likewise, investors didn't know how much the company paid for Vector until now, with Fitbit disclosing that Vector set it back by $15 million.
Both acquisitions were predicated on acquiring intellectual property and talent as opposed to either of the respective companies' existing operations or products. Combined with Coin, which Fitbit acquired in early 2016, that's three acquisitions that will contribute to Fitbit's smartwatch aspirations.
While the smartwatch market hit a major speed bump last year, Fitbit realizes that it needs to board the smartwatch train since that's very likely where the wearables market is heading. Fitbit may bill its Blaze as a "smart fitness watch," but the lack of third-party applications means it doesn't technically qualify as a smartwatch by most accepted category definitions. It's also ugly.
Blaze lineup. Image source: Fitbit.
Management recognizes that Blaze doesn't qualify as a full-featured smartwatch. There's also the Surge, but again the lack of third-party apps holds the product back. Fitbit is looking forward to jumping into the smartwatch market.
That's what he said
On the earnings conference call, founder and CEO James Park noted:
We're also investing to capitalize on the current shift in consumer sentiment toward more full-featured, sophisticated devices, and bring our unique strengths and experience to the smartwatch category. Similar to when we launched our Surge product and expanded the GPS-enabled watch category, we can expand the smartwatch category. Even today, with a significantly higher average selling price, this adjacent market opportunity more than doubles our addressable market.
Our recent acquisitions of assets from Pebble, Vector Watch, and Coin added software IT, including a developer platform and SDK, and deep and industry expertise, which complement and accelerate this effort. In addition, we are looking at developing form factors beyond the risk to build a full ecosystem of products that support our consumers' health and fitness journey.
Regarding whether or not Surge is a smartwatch, Park added, "No, I would not characterize Surge as a smartwatch. I think it was our first foray into the watch category in general, in particular GPS watches."
CFO Bill Zerella also pointed out that the main purpose of the Pebble acquisition was to accelerate the company's ability to develop a platform for third-party apps, since Pebble offers an app store with a very limited selection of third-party apps. Park said that the three acquisitions have given Fitbit a "very good foundation for creating a really compelling smartwatch product," and wouldn't rule out the possibility of more acquisitions going forward.
Fitbit hasn't specified when it will jump in, and certainly the development cycle takes quite some time. If and when the smartwatch market rebounds, Fitbit is getting ready.
