Apple’s smartwatch foray may start the clock on more M&A, sources say
The unveiling of Apple’s (NASDAQ: AAPL) smartwatch lends credibility to the fledgling category and it is likely to spur increased consolidation of wrist wearables, according to industry sources.
“It shows the entire consumer world that these emerging categories are real – not a flash in the pan,” said Jef Holove, general manager of Basis, a fitness and wellness band that Intel (NASDAQ: INTC) acquired for approximately USD 100m in March. Basis launched its next-generation smartwatch the same week as Apple.
Further consolidation of wrist wearables is considered likely as Apple and other large original equipment manufacturers (OEMs) such as Samsung (KRX: 005930), Motorola (NYSE: MSI) and LG Electronics (KRX: 066570) accrue a bigger share of the market, the industry sources said. Google (NASDAQ: GOOG), Amazon (NASDAQ: AMZN) or Microsoft (NASDAQ: MSFT) don’t yet have offerings of their own and consequently could be pushed into making an acquisition, noted Myriam Joire, product evangelist for Palo Alto, California smartwatch pioneer Pebble. Pebble could draw interest from Amazon and Microsoft, while Garmin (NASDAQ: GRMN), known for its global positioning system (GPS) navigation products, has a line of wearable fitness trackers whose niche athlete following could attract Google, she said.
With a wave of new smartwatches hitting the market this year, startups such as FitBit and Jawbone could feel pressure as newer products do what fitness bands can do plus a whole lot more, Joire said.
“The smartwatch is doing to the fitness band what the smartphone did to the Flip camera,” she said, referring to the digital video camera division that Cisco shuttered in 2011 two years after acquiring it.
Price erosion could force fitness bands into obsolescence in two or three years, Joire predicted.
A strategic partnership between Pebble and MisFit, a maker of wearable wellness and medical bands, is indicative of where product evolution is going, she said. Misfit’s specialized algorithms and user interface are being integrated into Pebble’s watch, she said, although some features available on MisFit’s Shine fitness band, such as sleep tracking, won’t be rolled out on Pebble until later. MisFit also appears committed to its own wearable devices, as evidenced by this week’s debut of a USD 50 fitness band called MisFit Flash, which sells for half the price of Shine.
Indeed, the fleeting battery life found in the majority of smartwatch lines and their higher price point leave room for both fitness bands and smartwatches – at least for the foreseeable future, the industry sources agreed. While Pebble boasts a week-long battery life in its USD 150 starter model, Apple’s least expensive smartwatch will retail for USD 349 and its battery will require a nightly charge.
“Just because Apple gets in a category doesn’t mean everyone else is going to die,” said Adam Jackson, CEO of Doctor On Demand, a healthcare IT company partnering with Apple. “It’s still early in the game for wearables.”
Fitness bands and smartphones “will borrow aspects of each other” over time, added Holove at Basis. Garmin’s new “vivosmart” is an example of this type of hybrid, as it includes Bluetooth-linked smartphone notifications, a hidden OLED screen, and several sensors for fitness tracking and alerts.
Still, there is a long way for wearables to go before winners and losers can be declared, the industry sources agreed. Google’s smartwatch platform, Android Wear, only opened up to OEMs on 18 March and while there is plenty of hype around Apple’s new watch lines, they won’t come to market until 2015. Plus, it remains to be seen if mainstream consumers beyond the tech cognoscenti in Silicon Valley will buy any of the wrist wearables, the sources said.
Between 2012 and 2013, the global smartwatch industry grew tenfold, reaching a market volume of USD 700m, according to a trade group. By the end of this year, the industry is projected to hit USD 2.5bn.