A Foolish Take: Google’s Big Bet On Fitbit

Can the tech titan rectify all its previous missteps in the wearables market?

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Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) subsidiary Google recently announced plans to acquire Fitbit (NYSE: FIT) for $2.1 billion. The takeover would make Google the fourth-largest wrist-worn wearables maker in the world, but it still faces a tough uphill battle against market leaders like Apple (NASDAQ: AAPL).

Chart showing global market share of wrist-worn wearable devices in Q2 2018 and Q2 2019

Data source: IDC. Chart by author.

Google already owns Wear OS, but the smartwatch platform failed to gain enough developers and many of its hardware partners abandoned ship. It also acquired some of Fossil‘s smartwatch tech earlier this year. Google’s purchase of Fitbit could pave the way for its long-rumored “Pixel Watch” to hit the market.

However, analysts expect Fitbit’s sales to decline 4% this year as it falls further behind companies like Apple, which generated “strong double-digit growth” in Apple Watch sales last quarter, according to CFO Luca Maestri. It’s also unclear whether Google will replace Fitbit’s OS with Wear OS or the other way around.

Either way, Google could struggle to gain as many developers as Apple’s WatchOS, and it still faces competition from other smartwatch makers like Samsung, which notably replaced Google’s Wear OS with its own Tizen OS. In short, Google’s big bet on Fitbit won’t be its magic bullet for conquering the wearables market.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Leo Sun owns shares of Apple. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, and Fitbit and recommends the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.

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