Google-Fitbit deal: Should Apple be wary?

San Francisco-headquartered activity trackers and wearables maker Fitbit is being acquired by Google`s parent company Alphabet, which is paying $7.35 per share in cash for the company, valuing it at about $2.1 billion. But the question is: Will the acquisition be profitable for Fitbit and Google, and should Apple be wary of the deal? Apple, which leads the smartwatch segment globally, hardly has anything to lose due to the deal -- at least in the short-term -- say experts.

"It is a little premature to say that this puts Google head-to-head with Apple in the wearables segment," Navkendar Singh, Research Director, IDC India, told IANS. "Google`s Fitbit acquisition does not put Apple in any threat over the short-term, given that Apple Watches are popular and the first choice for Apple loyalists," added Prabhu Ram, Head, Industry Intelligence Group (IIG), CMR.

But there is hardly any two opinions about the fact that the deal offers Google an opportunity to give its struggling hardware business a major facelift. Google Pixel smartphones have failed to impress Indian buyers. This year, the company did not introduce its Pixel 4 device in India. But in the wearable category, Fitbit has done well in India. Fitbit`s current smartwatch market share in India is around 7 per cent while its smartband market share is around 4 per cent.

"Apple leads the smartwatch segment globally, but the scenario is different in India. Fitbit has done well in India with investments around marketing and channel," Singh said. "It has a very loyal and active consumer base in India. To that extent this will help Google, with a ready set of consumers coming in Google`s fold and related data points around their usage and health indicators via Fitbit use," he added.

It is pertinent to note that Fitbit is the company that makes the Versa 2 smartwatch and the Charge 3 band, which, interestingly, are compatible with both Apple`s iOS and Google`s Android operating systems (OS), thus, giving it a slight edge over iOS.

According to James Park, Co-founder and CEO at Fitbit, Google is an "ideal partner" to advance their mission. "With Google`s resources and global platform, Fitbit will be able to accelerate innovation in the wearables category, scale faster, and make health even more accessible to everyone," Park said in a statement. "We have built a trusted brand that supports more than 28 million active users around the globe who rely on our products to live a healthier and more active life," Park added.

From Fitbit`s perspective, it does not have much headroom as an independent platform to grow and compete with premium brands, such as Apple, or at the lower spectrum with budget Chinese rivals, suggest industry experts. "For Fitbit, this acquisition comes at the right time," said Ram.

For Google, the Fitbit acquisition gives it a toe into the now growing wearable business in the country. This also arms the search engine giant with better capabilities in terms of user experience and software, as well as rich data troves. The deal is being largely seen as the evolution of Google`s Wear OS.

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"The biggest takeaway from Fitbit acquisition by Google would be a better future for Wear OS," noted Ram. Fitbit is now working to meet the needs of the budget-conscious Indian buyers, and is mulling to expand its offerings, particularly for those who are just embarking on their fitness journey. But how Google integrates the Fitbit brand into its fold is also a huge concern since Google does not have a great track record in absorbing some of the acquisitions it made over the years such as Motorola, Nest etc.

"Google would surely like to learn from the data of the Fitbit consumers and subsequently launch a few Fitbit devices on Wear OS, which is not doing very well for the past several quarters as compared to Fitbit OS and Apple Watch. It will be interesting to see how Google handles the integration from the brand, hardware and consumer points of view," Singh said.

"India being a value conscious market is very different from the other markets. Xiaomi is a leader here with basic wearables domination. Fitbit has been doing well for the past many years in the premium wearables space. It should keep on doing well for the next few quarters," he added.

The Google-Fitbit transaction is expected to close in 2020, subject to customary closing conditions, including approval by Fitbit`s stockholders and regulatory approvals.