October 29, 2019

Google just offered to buy Fitbit. Here's our take.

Daily Briefing

    Alphabet, Google's parent company, has made an offer to acquire Fitbit, sources told Reuters and CNBC on Monday, a move that could make Alphabet a major player in the wearable fitness tracker market.

    Details

    News of the offer sent Fitbit's stock soaring, CNBC reports. After jumping more than 18%, Fitbit's stock was halted, but later resumed trading and ended the day up 30.5%. A purchase from Alphabet could provide Fitbit with a "much-needed boost" in the market, CNBC reports, as the company has been losing its footing in wearables as Apple gains share. According to Strategy Analytics, Apple took over roughly half the global smartwatch market in 2018. Meanwhile, Fitbit cut its revenue forecast in July, citing lower sales than expected of its new Versa Lite watch.

    This isn't the first sign that Fitbit is looking to sell, as Reuters also reported last month that the company was in talks with investment bank Qatalyst Partners about a potential sale.

    Sources told Reuters that the negotiations between Alphabet and Fitbit do not mean a deal is certain, nor did the sources disclose the exact price Alphabet offered to acquire Fitbit.

    Fitbit declined to comment, CNBC reports, while Alphabet did not respond to CNBC's requests for comment.

    The deal would help Google gain a stronger foothold in both the wearables and the broader health market. Google does not currently manufacture a smartwatch, although it does license its Wear operating system to companies like Fossil. In January, Fossil said it would be selling its intellectual property related to smartwatch technology currently under development to Google for $40 million.

    According to Bloomberg, Google is currently under both federal and state investigations for anti-competitive behavior because of its online advertising and data collection practices, meaning that "any acquisition the company does [is] likely to come under strict scrutiny" (Feiner/Sherman, CNBC, 10/28; Roumeliotis/Dave, Reuters, 10/28; De Vynck, Bloomberg, 10/28).

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