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Motorola's New Smartwatch Is Yet Another Threat to Fitbit

By Sam Mattera - Jan 8, 2016 at 7:22AM

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The latest Android Wear device is a smartwatch aimed at runners.

Moto 360 Sport. Source: Motorola

Alphabet's (GOOG 2.36%) (GOOGL 2.39%) smartwatch platform, Android Wear, powers about a dozen different smartwatches from its many hardware partners. Most retail for around $100 to $300, and like other smartwatches, give owners of Android handsets easier access to notifications, apps, and contacts.

They also offer fitness tracking capabilities, including the ability to monitor steps taken, and (in some cases) track their owner's heart rate. That makes them a threat to Fitbit (FIT), whose lineup of various wearables compete for the same wrist-space and offer similar features. That competition is poised to heat up this month when the Moto 360 Sport, the first truly fitness-focused Android Wear watch, goes on sale.

A different type of Android Wear
The Moto 360 Sport is based on the second-generation Moto 360, the Android Wear watch Motorola launched last fall. That device was, for the most part, warmly received -- Engadget called it "probably the best option out there" among Android Wear devices, and characterized it as a significant improvement over its predecessor. Among Android Wear devices, the Moto 360 is rather ordinary, running the standard Android Wear platform and offering the same feature set as most of its competitors (a pedometer, heart rate monitor, and about a day or two of battery life). But it distinguishes itself favorably through a host of customization options (buyers can pick from a variety of sizes and color schemes) and lack of significant shortcomings.

The Moto 360 Sport is a more durable version of the Moto 360 with a few extra features. As its name implies, it's aimed at athletes. With its non-removable silicone band, it's less customizable and less attractive, but it's both dust- and water-resistant. Its display is specifically designed to be more visible in sunlight, and it includes built-in GPS. Two companion apps -- Moto Body and Moto Running -- track activity and assist runners in cataloging their workouts.

That may make it appealing for some. Still, it wasn't enough to win over most critics. Reviews haven't been overtly hostile, but it would be unfair to characterize them as favorable.

The Verge found fault with its singular focus on running, noting that its inability to track other types of workouts severely limits its appeal. "Right now you can only use the watch to track running, and that's it."

CNet took issue with its lack of physical buttons and inability to survive in the pool. "There's a single button ... its only function is to bring you back to the home screen. Everything is controlled by touch, which isn't ideal for running ... No showering or swimming? C'mon."

Fitbit dominates the wearables market
Motorola wasn't among the top five firms that sold the most wearables during the first three quarters of 2015, according to IDC, and it seems unlikely that the Moto 360 Sport will do much to change that. If its limitations don't do it in, its reliance on Alphabet's platform alone will curtail demand (although some Android Wear devices -- including the Moto 360 Sport -- work with the iPhone, their capabilities are severely limited).

Fitbit, in contrast, continues to lead the market. It sold more wearables than any other company in the first, second, and third quarters of last year. Its fitness bands are significantly cheaper than most Android Wear watches (including the Moto 360 Sport, which retails for $299) and work well regardless of mobile phone platform.

But the Moto 360 Sport should still be seen as a threat to Fitbit's business -- perhaps not by itself, but for the trend that it represents. The Android Wear platform remains in its infancy -- it's less than two years old. As Android Wear devices continue to evolve and pursue different niches, Fitbit could face further pressure. The Moto 360 Sport may be the first fitness-focused Android Wear watch, but it probably won't be the last.

That poses an even bigger threat as Fitbit continues to move upmarket. The two new devices it introduced last year-- the Fitbit Charge HR and the Fitbit Surge -- are its most expensive trackers yet. The Surge, at $249, is nearly as expensive as the Moto 360 Sport, but lacks the ability to run apps and can't handle as many notifications.

The Moto 360 Sport may land with a dud, but if I were a Fitbit shareholder, I'd be afraid that the next one won't.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Sam Mattera has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares) and Alphabet (C shares). 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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