What Google’s $2.1 Billion Acquisition of Fitbit Means

Following days of rumors, Fitbit announced last week that it is set to be acquired by Google for $7.35 per share. The $2.1 billion all-cash deal will bring the wearables pioneer into the Google suite of companies--but what exactly does the deal mean for the burgeoning wearables market?

For many quarters now, Fitbit has occupied a rather strange position in this growing market. As one of the first wearables companies, Fitbit remains very popular and widely admired, yet it has come to be squeezed by rivals on both ends as of late. Apple Watch has quickly become a leader on the high-end of the market while less expensive brands such as Xiaomi have been able to undercut Fitbit's pricing on its trackers. Even Apple itself has emerged as a challenger at lower price points: at just $199, the Apple Watch Series 3 is less expensive that Fitbit's latest Versa 2.

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So given this, what is Google likely to do with its new property?

Despite years of rumors, Google has not yet come out with its own smartwatch technology; many industry observers thought that a Pixel Watch could be unveiled at Google's recent hardware event, but such technology was notably absent. At the same time, Google is certainly interested in gaining a stake in the wearables sector, taking a first step with the purchase of smartwatch intellectual property from Fossil back in January.

Google does have its own wearable operating system, Wear OS, but it's widely regarded as needing improvement--and Fitbit's expertise in this area is unmatched by anyone except Apple. One of Fitbit's biggest benefits has been that it controls both the hardware and software for its gadgets, though many expect that Google will have Fitbits run Wear OS in the future.

In announcing the deal, Fitbit CEO James Park did make one thing clear: "Fitbit will continue to remain platform-agnostic across both Android and iOS."

In other words, when Google's acquisition closes as projected next year, it's likely that the Fitbit brand will still remain; it just may end up bearing the name Google Fitbit much as Nest became Google Nest.