Fitbit's $23M Pebble purchase lower than expected, under financial pressure from Apple Wat...

Posted:
in Apple Watch edited February 23
Fitbit has confirmed it paid $23 million for smartwatch maker Pebble, far below the expected value of the deal when it was announced in early December, amidst both companies' struggles against the Apple Watch.




Initial reports suggested Fitbit would be paying out between $34 million and $40 million for Pebble, which is seen more as an acquisition of software and talent to combat the dominant Apple Watch in the wearable device market. Only 40 percent of Pebble's employees were offered positions at Fitbit's San Francisco headquarters, with the rest let go outright or offered a severance package.
The price Fitbit paid for Pebble is roughly the same amount the smartwatch maker raised through two highly successful crowdfunding campaigns.
Fitbit hasn't assumed debts accumulated by Pebble, and is selling off the majority of assets and inventory. Most Pebble products will be discontinued, while backers of the Pebble 2 who have yet to receive rewards are being refunded their pledges.

The purchase price may be considered too low for fans of the Pebble smartwatch, one of the first examples of the product category to achieve a level of popularity with consumers. It is noted that the $23 million price is approximately the same as funds raised in both of Pebble's Kickstarter campaigns, though the fact that the company also received more traditional investment as well means investors are likely to have lost money on their stake.

Fitbit revealed the value of its Pebble acquisition as part of its recent quarterly and full year results, with the lower purchase price minimizing the damage to Fitbit's financial situation. The purchase of Vector Watch, a lower-profile smartwatch company, is also confirmed in the report with a price of $15 million, seemingly making the deal for the more-recognizable Pebble more of a bargain.

According to the quarterly figures ending in December, Fitbit's revenue dropped year-on-year from $711.6 million to $573.8 million, while the net profit of $64.2 million at the end of 2015 has turned into a net loss of $146.3 million for the quarter. For the full year of 2016, revenue of $2.17 billion is up from the $1.86 billion achieved in 2005, but heavy costs dragged the 2015 net profit of $175.7 million down to a $102.8 million net loss.

Fitbit has already started to correct its course following the disastrous fourth quarter, including cost reductions and corporate restructuring that should save around $200 million, and the loss of 107 jobs. Talent acquisitions, such as that of Pebble's staff, will help the company spread out more from fitness tracking into providing more smartwatch functionality to its customers, allowing it to compete more directly with its main competition, the Apple Watch.

Comments

  • Reply 1 of 16
    mac_128mac_128 Posts: 2,735member
    I'm confused, how does Fitbit getting a deal on Pebble reflect fitbit's struggles against the Apple Watch? I understand how it reflects pebbles struggles, and I understand how Fitbit has their own troubles, but that first sentence seems like a non-sequitur ...
  • Reply 2 of 16
    adm1adm1 Posts: 295member
    I don't really think the fitbit line is comparable to the apple watch, maybe the Blaze is the closest thing since it can do some phone notifications but I doubt any apple watch buyers would have otherwise went for a fitbit had the apple watch not been released. I think fitbit's struggles are more to do with the Mi band etc. - cheap capable trackers, some with heart rate monitors.
    lostkiwi
  • Reply 3 of 16
    But... but... but I thought everyone said that AppleWatch was a failed product because Apple isn't breaking out AppleWatch sales figures. /s Fitness bands and smartwatches both have their place with consumers. I don't really see how Fitbit would be hurting Apple when each of the devices use is so much different. Pebble's going price is practically a fire sale. Again it's always this crazy quest for major market share percentage or rapid growth over profitability. It really doesn't make much sense. It's always best to keep the accounting books in the black rather than boast about market share or growth spurts.
    watto_cobrabadmonk
  • Reply 4 of 16
    calicali Posts: 2,909member
    mac_128 said:
    I'm confused, how does Fitbit getting a deal on Pebble reflect fitbit's struggles against the Apple Watch? I understand how it reflects pebbles struggles, and I understand how Fitbit has their own troubles, but that first sentence seems like a non-sequitur ...
    Took me a while also but think about it, FitBit initially planned to pay more but their cash on hand is dissipating before their eyes. This is why they payed 15 million a while back for Vector but only a few million more for the much more popular Pebble, they can't afford as much now. 

    Still not bad for Pebble founders considering they had nothing a few years ago.

    This is scary or Fitbit and it seems Apple has no competition in this space.

    Remember, every market Apple enters they have a new competitor so I don't believe droid is it. 

    watto_cobra
  • Reply 5 of 16
    tjwolftjwolf Posts: 105member
    adm1 said:
    I don't really think the fitbit line is comparable to the apple watch, maybe the Blaze is the closest thing since it can do some phone notifications but I doubt any apple watch buyers would have otherwise went for a fitbit had the apple watch not been released.
    What makes you say that?  I would think the opposite - if I (and most of the people I know) hadn't been aware of the upcoming Apple Watch, I would have definitely bought a Fitbit (or other fitness tracker).  The problem for Fitbit is that smartwatches do more than Fitness trackers (the obvious analogy here is that smartphones did more than  flip phones in 2007).  Most folks prefer to wear just one thing on their wrist, so might as well make it the more capable thing (never mind that most folks would prefer charging one thing vs. two).  In my opinion, fitness trackers' days are numbered - they simply can't compete with the much larger set of capabilities unlocked by wearing a smartwatch. 
    lostkiwicaliwatto_cobra
  • Reply 6 of 16
    boredumbboredumb Posts: 1,319member
    tjwolf said:
    adm1 said:
    I don't really think the fitbit line is comparable to the apple watch, maybe the Blaze is the closest thing since it can do some phone notifications but I doubt any apple watch buyers would have otherwise went for a fitbit had the apple watch not been released.
    I would think the opposite - if I (and most of the people I know) hadn't been aware of the upcoming Apple Watch, I would have definitely bought a Fitbit (or other fitness tracker). 
    Umm, I believe that that IS what adm1 said...
  • Reply 7 of 16
    boredumbboredumb Posts: 1,319member

    cali said:
    mac_128 said:
    I'm confused, how does Fitbit getting a deal on Pebble reflect fitbit's struggles against the Apple Watch? I understand how it reflects pebbles struggles, and I understand how Fitbit has their own troubles, but that first sentence seems like a non-sequitur ...
    Took me a while also but think about it, FitBit initially planned to pay more but their cash on hand is dissipating before their eyes. This is why they payed 15 million a while back for Vector but only a few million more for the much more popular Pebble, they can't afford as much now. 
    It might also reflect a waning optimism that the Pebble acquisition would actually constitute that much help in combating Apple Watch...
    caliwatto_cobra
  • Reply 8 of 16
    tjwolf said:
    adm1 said:
    I don't really think the fitbit line is comparable to the apple watch, maybe the Blaze is the closest thing since it can do some phone notifications but I doubt any apple watch buyers would have otherwise went for a fitbit had the apple watch not been released.
    What makes you say that?  I would think the opposite - if I (and most of the people I know) hadn't been aware of the upcoming Apple Watch, I would have definitely bought a Fitbit (or other fitness tracker).  The problem for Fitbit is that smartwatches do more than Fitness trackers (the obvious analogy here is that smartphones did more than  flip phones in 2007).  Most folks prefer to wear just one thing on their wrist, so might as well make it the more capable thing (never mind that most folks would prefer charging one thing vs. two).  In my opinion, fitness trackers' days are numbered - they simply can't compete with the much larger set of capabilities unlocked by wearing a smartwatch. 
    Yeah that is true - many people don't want to wear too much on their wrists.  I have a company issued Fitbit that I have kept and it keeps on trucking.  
    I like the look of AppleWatches but they seem so big and heavy.  Hopefully within a year or two Jony will have made it thinner.  

    Are there any male AI readers who wear a 'ladies' AppleWatch?  Just curious...
  • Reply 9 of 16
    mac_128mac_128 Posts: 2,735member
    boredumb said:

    cali said:
    mac_128 said:
    I'm confused, how does Fitbit getting a deal on Pebble reflect fitbit's struggles against the Apple Watch? I understand how it reflects pebbles struggles, and I understand how Fitbit has their own troubles, but that first sentence seems like a non-sequitur ...
    Took me a while also but think about it, FitBit initially planned to pay more but their cash on hand is dissipating before their eyes. This is why they payed 15 million a while back for Vector but only a few million more for the much more popular Pebble, they can't afford as much now. 
    It might also reflect a waning optimism that the Pebble acquisition would actually constitute that much help in combating Apple Watch...
    words of wisdom given to me once -- 'rich or poor it's good to have money'. If Fitbit can get away with offering less, and Pebble is doing so badly they'd rather take it than shop around for a better offer, I'm not sure how it reflects badly on Fitbit. The Verizon/Yahoo purchase is a perfect example. After Verzion and Yahoo agreed on a purchase price, the revelations about Yahoo's massive data breach, which effectively reduced the value of the company for Verzion. Many thought Verzion would scuttle the deal, but as of a couple of days ago, Verizon shaved $350 million off the deal.

    We can speculate until the cows come home, but how about some actual reporting and facts as to why the price was lowered to justify the conclusion that Fitbit is suffering at the expense of the Apple Watch success. That's all I'm saying.
    watto_cobra
  • Reply 10 of 16
    mac_128 said:
    boredumb said:

    cali said:
    mac_128 said:
    I'm confused, how does Fitbit getting a deal on Pebble reflect fitbit's struggles against the Apple Watch? I understand how it reflects pebbles struggles, and I understand how Fitbit has their own troubles, but that first sentence seems like a non-sequitur ...
    Took me a while also but think about it, FitBit initially planned to pay more but their cash on hand is dissipating before their eyes. This is why they payed 15 million a while back for Vector but only a few million more for the much more popular Pebble, they can't afford as much now. 
    It might also reflect a waning optimism that the Pebble acquisition would actually constitute that much help in combating Apple Watch...
    words of wisdom given to me once -- 'rich or poor it's good to have money'. If Fitbit can get away with offering less, and Pebble is doing so badly they'd rather take it than shop around for a better offer, I'm not sure how it reflects badly on Fitbit. The Verizon/Yahoo purchase is a perfect example. After Verzion and Yahoo agreed on a purchase price, the revelations about Yahoo's massive data breach, which effectively reduced the value of the company for Verzion. Many thought Verzion would scuttle the deal, but as of a couple of days ago, Verizon shaved $350 million off the deal.

    We can speculate until the cows come home, but how about some actual reporting and facts as to why the price was lowered to justify the conclusion that Fitbit is suffering at the expense of the Apple Watch success. That's all I'm saying.
    It also depends what fitbit is actually getting out of the deal, engineering, distribution, patents, brand, etc.
    I'm thinking, it's mostly brand name, a few patents, that's worth anything now.
    For Yahoo, they're main brand is worth next to nothing, but their sub properties are still worth a lot; the $350M cut was basically shaving off the last rest of worth off the original Yahoo properties' worth.
  • Reply 11 of 16
    lostkiwi said:
    tjwolf said:
    ...Most folks prefer to wear just one thing on their wrist, 
    Yeah that is true - many people don't want to wear too much on their wrists.  
    Times are a changin' ..AppleWatch combined with a Rolex is becoming a staple with certain demographics. On Wall Street, they're on the same arm. On Main Street, they're on different arms.  New models need something like LTE Cat 1 and a capability to analyze blood pressure a few times per day on a two day battery.
  • Reply 12 of 16
    boredumbboredumb Posts: 1,319member
    mac_128 said:
    We can speculate until the cows come home...
    Congrats - you've finally figured out what this site is for. ;)
  • Reply 13 of 16
    tjwolftjwolf Posts: 105member
    Are there any male AI readers who wear a 'ladies' AppleWatch?  Just curious...

    I was tempted to get the 38mm - and sometimes still think I should have.  My wife's 38mm looks fine on me (I'm 6'0, 190lb, very average middle-age guy :-)  The main reason I opted for the 42mm - and my experience has borne this out - is the battery life: the 42mm definitely lasts a little longer.  We never have trouble with the watch lasting a full day, but sometimes we go on an overnight trip and don't bother with the watch charger.  Having fully charged both watches Saturday morning, by Sunday night, my wife's watch used to pretty much be gone, while mine would still have 20+%.  The series 2 seems to be better at conserving battery life: my wife and I just came back from one of these overnight jaunts, and my watch still had some 60% and my wife 30% (maybe this was a one-off because we didn't use 'workout' mode on this trip).

    For what it's worth, I don't find the watch bulky at all.  If you look at it by itself, it's a little bulky (but still nothing like most Android watches), but you don't see the bottom protrusion at all when you wear it as it kind of pushes into the skin (not in an uncomfortable way either).  The only design choice I'm ambivalent about is the rectangular shape: round, to me, just looks a little better.  But, from a functional perspective, rectangular is simply better (just try showing as much information as the "modular" face shows - on a round watch whose diameter is the same as the Apple watch width.)
  • Reply 14 of 16
    tjwolftjwolf Posts: 105member
    boredumb said:
    tjwolf said:
    adm1 said:
    I don't really think the fitbit line is comparable to the apple watch, maybe the Blaze is the closest thing since it can do some phone notifications but I doubt any apple watch buyers would have otherwise went for a fitbit had the apple watch not been released.
    I would think the opposite - if I (and most of the people I know) hadn't been aware of the upcoming Apple Watch, I would have definitely bought a Fitbit (or other fitness tracker). 
    Umm, I believe that that IS what adm1 said...
    Umm, no?  He's saying that Apple watch buyers - i.e. folks who bought an Apple watch - would *not* have bought a Fitbit in its place if there were no Apple Watch.  I'm suggesting they would have (me and a few Apple watch wearing friends being my data points).
  • Reply 15 of 16
    tjwolftjwolf Posts: 105member
    boredumb said:
    tjwolf said:
    adm1 said:
    I don't really think the fitbit line is comparable to the apple watch, maybe the Blaze is the closest thing since it can do some phone notifications but I doubt any apple watch buyers would have otherwise went for a fitbit had the apple watch not been released.
    I would think the opposite - if I (and most of the people I know) hadn't been aware of the upcoming Apple Watch, I would have definitely bought a Fitbit (or other fitness tracker). 
    Umm, I believe that that IS what adm1 said...
    Umm, no?  He's saying that Apple watch buyers - i.e. folks who bought an Apple watch - would *not* have bought a Fitbit in its place if there were no Apple Watch.  I'm suggesting they would have (me and a few Apple watch wearing friends being my data points).
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