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Business News/ Companies / Fitbit buys software assets from smartwatch start-up Pebble
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Fitbit buys software assets from smartwatch start-up Pebble

Grabbing Pebble's software talent and other resources, like its developer relationships, may help Fitbit better compete with Apple's Watch

Fitbit didn’t disclose terms of the acquisition, the price is less than $40 million, and Pebble’s debt and other obligations exceed that.Premium
Fitbit didn’t disclose terms of the acquisition, the price is less than $40 million, and Pebble’s debt and other obligations exceed that.

San Francisco: Fitbit Inc., the fitness band maker, has acquired software assets from struggling smartwatch start-up Pebble Technology Corp., a move that will help it better compete with Apple Inc..

The purchase excludes Pebble’s hardware, Fitbit said in a statement Wednesday. The deal is mainly about hiring the start-up’s software engineers and testers, and getting intellectual property such as the Pebble watch’s operating system, watch apps, and cloud services, people familiar with the matter said earlier.

While Fitbit didn’t disclose terms of the acquisition, the price is less than $40 million, and Pebble’s debt and other obligations exceed that, two of the people said. Fitbit is not taking on the debt, one of the people said. The rest of Pebble’s assets, including product inventory and server equipment, will be sold off separately, some of the people said.

“With basic wearables getting smarter and smartwatches adding health and fitness capabilities, we see an opportunity to build on our strengths and extend our leadership position in the wearables category," said James Park, chief executive officer and co-founder of Fitbit.

The Pebble fire sale is the result of financial struggles in a smartwatch market that failed to grow as quickly or as large as initially hoped and hyped. Industry shipments slumped 52% in the third quarter, according to research firm IDC, and Pebble cut a quarter of its staff earlier this year.

Apple Watch sales have been lackluster compared with iPhones, although chief executive officer Tim Cook told Reuters Tuesday that sales are “off the charts."

Fitbit has had its own struggles, with its stock slumping 34% on 3 November after the company cut a holiday sales forecast. After years of focusing on fitness wearables, Fitbit got into smartwatches with the introduction of the Blaze this year. Grabbing Pebble’s software talent and other resources, like its developer relationships, may help Fitbit better compete with Apple’s Watch. Earlier this year, Fitbit acquired assets from payments start-up Coin, which could help it add features rivaling Apple Pay too.

Fitbit shares were up less than 1% to $8.04 at 9:54 am in New York. They’re down 73% this year through Tuesday.

Job offers

Fitbit began sending job offers to about 40% of Pebble’s employees in the last week. Most of these are software engineers. Very few Pebble interface designers were offered jobs and hardware teams were not offered positions, the people said. Some staff who didn’t get an offer will be given severance packages, one of the people said.

Pebble’s Migicovsky is planning to rejoin start-up incubator Y Combinator as a partner advising early-stage companies on hardware development, people with knowledge of the matter said. Y Combinator’s hardware head recently left, Bloomberg News reported last month.

Pebble announced three new watches in May, the Pebble 2, Time 2, and the Pebble Core. The Pebble 2 has already started shipping to people who funded the start-up through crowd-funding site Kickstarter. The Time 2 and Pebble Core will be cancelled and refunds will be issued to Kickstarter backers, one of the people said.

Following the acquisition, Pebble’s offices will be closed and it will be up to Fitbit to decide whether to still use the Pebble brand, one of the people said. The former Pebble engineers will relocate to Fitbit’s offices in San Francisco, the person said.

The deal will mean the Pebble stock held by employees is worthless, two of the people said. The money will instead go to debt holders, vendors, some of its main equity investors, and Kickstarter refunds for the Time 2 and Pebble Core orders, the people said.

Technology news and analysis website The Information reported on 30 November that Fitbit was near a deal to buy Pebble. Bloomberg

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Published: 07 Dec 2016, 09:11 PM IST
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