Jawbone in search of new funds after Fitbit approach
December talks petered out despite maker of UP wristbands facing cash crisis
Fitbit made an approach late last year to buy Jawbone, its longstanding rival in wearable technology, as the struggling maker of UP fitness trackers scrambles to secure its future.
In the run-up to Christmas, Fitbit expressed interest in a deal that would see it acquire Jawbone’s assets, including its intellectual property, at the same time as settling ongoing litigation between the two San Francisco-based companies, according to several people familiar with the situation.
Fitbit, the market leader in fitness trackers, and Jawbone, the maker of UP wristbands and Jambox Bluetooth speakers, have been suing each other for patent infringement and theft of trade secrets for more than a year.
However, these preliminary talks quickly fizzled after Fitbit suggested a price that was a tiny fraction of Jawbone’s $1.5bn valuation just a year ago.
Pressed to find a solution to its present funding crisis by BlackRock, which would have the first claim to any sale proceeds, Jawbone has sought alternative bidders, according to these people. Jawbone has failed to secure an offer that its management sees as valuing the company fairly and it is now seeking to secure new financing, as it eyes a pivot towards clinical medical devices.
According to people close to the company, Jawbone is close to securing funds from a new investor that would enable the company to remain viable as an independent entity.
Fitbit and Jawbone both declined to comment.
Despite raising more than $1bn in total funding over the course of more than 15 years, Jawbone has faced a series of financing problems over the past two years.
Last year, Jawbone saw its valuation cut in half as it raised $165m. In 2015, when it was priced at $3bn, BlackRock had led a $300m financing, largely in debt, and the fund manager has been pushing Jawbone towards a sale, according to people familiar with the discussions. BlackRock declined to comment.
Another restructuring is now under way as Jawbone repositions its business away from its historical focus on “lifestyle” products aimed at consumers. Jawbone has been working on a health-monitoring wearable that would come with regulatory approval from the Federal Drug Administration, enabling it to be sold through the US healthcare system or for consumers to reclaim the cost from insurers.
Jawbone was founded by Hosain Rahman and Alexander Asseily in 1999 as Aliph, when it pioneered Bluetooth headsets for mobile phones. After the popular Jambox line of wireless speakers, it moved into health-tracking wearables with the launch of UP in 2011. The most recent significant product launch was the heart-rate tracking UP3, which went on sale in 2015 but has struggled to win a large following.
A low-priced takeover or collapse of the company would mark the latest failure in the wearable technology market, as some analysts question whether mainstream consumers will ever take to the idea of wearing tiny computers on their wrists.
As the market leader in fitness trackers, Fitbit has been rolling up some of the industry’s smaller players and also-rans. It snapped up assets of smartwatch pioneer Pebble in a cut-price deal late last year and earlier this week it acquired certain assets from the European company behind the Vector smartwatch.
“As with our recently announced acquisition of Pebble assets, Vector brings valuable industry expertise that will help accelerate the development of new products, features and functionality,” Fitbit said.
Just before Christmas, Fitbit withdrew its complaint against Jawbone at the US International Trade Commission, where it had sought an import ban against its rival’s UP products, alleging patent infringement.
In its motion to the ITC to dismiss the case, Fitbit said Jawbone “no longer offers for sale any of its wearable activity trackers, nor any of its other products. Press reports and other public documents indicate that the demise of Jawbone’s products has created substantial questions regarding Jawbone’s ability to continue to operate.”
