Google is buying Fitbit for $US2.1 billion

Hollis Johnson/Business InsiderThe Fitbit Versa 2.
  • Google is acquiring the popular wearable maker Fitbit in a deal worth $US2.1 billion, the tech giant announced on Friday.
  • The deal is expected to close in 2020.
  • Google is paying $US7.35 per share, a major premium on Fitbit’s current stock price.
  • Visit Business Insider’s homepage for more stories.

Google is buying wearables maker Fitbit for $US2.1 billion in cash, a bold move by the internet giant to boost its capabilities in the nascent market for wearable technology even as it faces intense regulatory scrutiny over its vast trove of personal data.

The $US7.35 per-share price that Google is paying represents a premium of more than 70% from where Fitbit’s stock was trading earlier this week, before reports of deal talks leaked.

The reason for the acquisition is simple: Google wants a stronger foothold in the wearables industry, which is dominated by Apple’s Watch and Fitbit’s various devices. Although Google was one of the first companies to recognise the potential of wearable technology, it has failed to develop a hit product.

Meanwhile, Apple’s wearables, home, and accessories business unit, which includes its Apple Watch and AirPods, reported 54% revenue growth in its most recent quarter, with $US6.5 billion in sales.

“Over the years, Google has made progress with partners in this space with Wear OS and Google Fit,” Rick Osterloh, Google’s senior vice president of devices and services, said in a blog post announcing the purchase. “But we see an opportunity to invest even more in Wear OS as well as introduce Made by Google wearable devices into the market.”

It was not immediately clear whether Google intended to maintain Fitbit’s current products and branding or whether it plans to use the technology that it’s going to acquire to create a new line of Google smartwatches and other devices. Fitbit said in a news release that it would continue to remain “platform agnostic” across both Google’s Android and Apple’s iOS.

The deal is expected to close in 2020, pending regulatory approval and other closing conditions, Fitbit said.

A rocky regulatory road ahead

Getting regulators to bless the deal may prove tricky. Google’s business practices are already under investigation by the US Department of Justice as well as by a group of 50 state attorneys general. And the company, along with Facebook and Amazon, is facing a significant backlash by politicians and consumers over its handling of consumers’ personal data.

An acquisition of Fitbit would be particularly sensitive because the devices track a wearer’s sleeping habits, heart rate, and other personal information.

Osterloh vowed that Google would “never sell personal information to anyone” and that Fitbit’s health and wellness data won’t be used for Google ads.

“We will give Fitbit users the choice to review, move or delete their data,” Osterloh wrote.

Rick Osterloh scrapping Google watch 4x3Hollis Johnson/Business Insider; Samantha Lee/Business Insider; VCG/Visual China Group via Getty ImagesGoogle’s Rick Osterloh.

An opportune time for Google swoop in

Fitbit has sold more than 100 million of its devices, a collection of smartwatches and sleek activity trackers that cost between $US100 and $US200.

Still, the company’s business has struggled in recent years. Fitbit’s $US1.5 billion in 2018 revenue was down 6% from the year before, and the company posted a $US186 million net loss.

Fitbit’s stock price has for years been in a relatively steady decline. The company went public in June 2015; by February 2016, it was trading at half its IPO value. The current stock price represents another major dropoff, and its latest wearable has failed to take off the same way that prior devices did.

Fitbit cofounder and CEO James Park sees Google’s acquisition as a means of expanding Fitbit’s reach.

“Google is an ideal partner to advance our mission,” he said. “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.”

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