One of the most exciting pieces of news on Monday was a story that emerged suggesting that Google’s (NASDAQ: GOOG) parent company Alphabet had made an offer to buyout health-device producer Fitbit (NYSE: FIT). The news was enough to send shares of the company surging by over 30% after initially being halted during the day due to the surge.
Although its currently unclear how much Alphabet had offered to buy out Fitbit, the health-device company’s market value is currently sitting at $1.5 billion following the jump, so it wouldn’t be surprising if Alphabet made an offer in the $2 billion to $3 billion dollar range.
What the deal would do, however, is make Alphabet a major participant in the wearable fitness submarket, competing directly which Apple’s smartwatches. Although Google does produce its own operating system for wearable technologies, it still doesn’t produce its own comparable smartwatch at the moment.
Reuters first covered the story on Monday, where anonymous sources familiar with both companies confirmed that an offer had been made. Although neither Google nor Fitbit commented on the news, it wouldn’t be surprising to see the offer get officially confirmed in the upcoming days.
While Google/Alphabet’s acquisition of Fitbit would be good for the tech giant, giving it a potential avenue to compete with Apple’s own smartwatches, Fitbit would also benefit significantly from the deal. As the third-largest producer of wearable fitness trackers, Fitbit has actually been losing market share over the past few years as other major tech giants, including Chinese firms like Xiaomi, Huawei, and Japanese Samsung have all entered into this market in addition to Apple.
While the company has done reasonably well for itself, it has failed to gain traction among most users, despite doing its best to reduce prices and launch a new subscription to help increase sales. In the end, Fitbit had to cut its revenue expectations below Wall Street’s earlier this year, sending shares falling as analysts began to worry for the company. Finding a major buyer would solve these problems in a single swoop.
Shares of Fitbit jumped by 30.9% in response to the news, as a Google/Alphabet buyout would be exactly what the company needs. Since going public back in June 2015, Fitbit has seen its share prices fall by a whopping 86%. While Fitbit could stage a major comeback with the backing of Google, it’s still uncertain whether the company will have what it takes to compete with Apple’s already dominant position in the fitness tracker/smartwatch market.
Fitbit Company Profile
Fitbit Inc is a provider of health and fitness devices. The company’s platform combines connected health and fitness devices with software and services. Its platform includes a family of wearable devices which include health and fitness trackers and smartwatches, enable the users to view data about their daily activity, exercise and sleep in real-time. The company software and services which include an online dashboard and mobile app, provide users with data analytics, motivational and social tools, and virtual coaching through customized fitness plans and interactive workouts. – Warrior Trading News
