Fossil Makes Wearables Play With $260 Million Misfit Acquisition

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Texas-based watchmaker Fossil is making a late entry into the overcrowded and hyper-litigious activity tracker market with a reported $260 million acquisition of Misfit Wearables. The acquisition will be the largest in the industry, topping Intel’s $100 million acquisition of Basis in 2014, and Jawbone’s 2013 acquisition of BodyMedia for a price rumored to be north of $100 million as well. The transition will bring Misfit CEO and co-founder Sonny Vu to Fossil as the president and CTO of connected devices.

It’s certainly an interesting time to be moving into activity trackers for Fossil. Other major brands like Nike and Under Armour are building digital ecosystems, but are sitting out the hardware fight. Nike sunset its FuelBand activity tracker in 2014 and realigned its staff to expand the Nike+ platform instead. Under Armour avoided the space to begin with, acquiring exercise app MyFitnessPal for $475 million and fitness community app Endomondo for $85 million, but stayed away from hardware after its own failed experiment with a fitness tracker product line. The remaining major players in the fitness tracker market are Fitbit, Jawbone, and Intel’s Basis product line. Fitbit and Jawbone are entrenched in a legal battled that now includes four lawsuits and a countersuit, all filed in the last year. Most concerning, however, is the growing speculation that it’s just a matter of time before major consumer electronics vendors, namely Samsung and Apple, get their smartwatch offerings dialed in enough to decimate the activity tracker market in the same way that smartphones replaced MP3 players and GPS devices.

The upside for Fossil is the potential revenue. The company’s watch sales are flat year-to-date. Meanwhile, its competitors are bringing their own increasingly sophisticated devices to market, like Tag Heuer’s latest wristwatch, which runs on an Android Wear operating system and tracks daily steps and caloric burn. For those that are thriving in the activity tracker market, namely Fitbit, returns have been fantastic. Fitbit’s Q3 revenue was $409 million, and earnings per share closed at $0.19, nearly double analyst expectations of $0.10.

For Misfit, it must have been an electrifying few years leading up to its acquisition. The company officially launched in 2011, but operated in stealth until 2013, when it unveiled its Misfit Shine activity tracker through an Indiegogo crowdfunding campaign that raised $847,000 on an initial goal of just $100,000. Early shipments were delayed by hardware and software issues, but by mid-summer 2013, the problems were resolved and shipments were en route to customers. After its campaign, the company went on a near full-time fundraising tear, closing a $15 million Series B in December 2013, and then a $40 million Series C in December 2014. Now, just under a year later, Misfit has been acquired in a record-setting deal for the market.


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