The competitors has taken a toll on Fitbit. The firm had $1.5 billion in income in 2018, down 6 p.c from the 12 months earlier than, squeezing out a web revenue of $48 million. In July, Fitbit lowered its steering for the remainder of the 12 months after asserting disappointing gross sales outcomes for its Versa Lite gadget, which was supposed to compete with the broader capabilities of the Apple Watch.
Google is dipping into its $121 billion money pile to purchase Fitbit and develop its lineup of hardware merchandise, which already contains smartphones, tablets, laptops and good audio system. In an announcement on Friday, Fitbit stated Google was paying $7.35 per share in money, or about $2.1 billion. Fitbit shares surged 15 p.c on the information. The deal is predicted to shut in 2020, though no particular date was offered.
Google has pushed aggressively into hardware since 2016, when it launched smartphones underneath its personal Pixel model. But it has not gained vital traction. The smartphones are typically nicely reviewed, however they’re nonetheless an afterthought to Apple and Samsung. Google additionally sells a variety of different dwelling gadgets, together with digital thermostats and smoke detectors that got here with the 2014 acquisition of Nest.
Watches, a section dominated by Apple, are a gap in Google’s product lineup. By buying Fitbit, Google acquires a acknowledged model and the closest competitor to Apple out there, stated monetary analysts.
In a notice to purchasers, Michael Pachter, an analyst at Wedbush Securities, stated “buying Fitbit makes more sense than trying to build yet another competitor to Fitbit.” However, he added that this was one other instance of Google “tilting at windmills” as a result of the corporate was “uniformly bad at consumer products in our view, and appears to us to be intent on spending whatever it takes to prove our view wrong.”
Because Google has been the topic of antitrust investigations in Europe and the United States, regulatory issues grasp over the deal. In a submitting with the Securities and Exchange Commission, the 2 firms stated Google would pay Fitbit a $250 million breakup price to Fitbit if the deal fails to safe antitrust approval. The Justice Department and the Federal Trade Commission declined to touch upon the deal.
So far, a lot of the antitrust scrutiny directed at Google has targeted on the search and promoting facet of its enterprise. How Google presents its search outcomes could possibly be topic to antitrust legal guidelines as a result of it handles greater than 90 p.c of searches worldwide, in accordance to some estimates.