Watchmaker Fossil Group Inc. will be paying $260 million for the acquisition of startup Misfit Inc., which makes wearable fitness trackers. Based in Richardson, Texas, the Fossil Group has its brands Skagen and Fossil and also licenses a variety of others including some prominent names like DKNY, Diesel and Michael Kors. Co-founder and chief executive of Misfit, Sonny Vu, said that it was difficult to survive in this market if you don’t have a brand name. After the acquisition, Mr. Vu will be taking up the position of chief technology officer and president of connected devices for the Fossil Group. The transaction is expected to close by the end of this year.
In the past year, it has gotten even more difficult to be a fitness tracking startup due to intense competition. Cheap variants were introduced by Chinese firms such as Xiaomi while Apple Inc. also made an entrance into the market with its Apple Watch. Their watch also boasts the function that monitors during sleep-and-fitness. Due to such heavy competition, Jawbone has been struggling in the past year. However, it seems that Fitbit has protected itself from this trend as its June IPO was a huge success with each share priced at $20.
The share price of the startup went as high as $51.90, but have reduced considerably since then. The digital officer and chief strategy officer at Fossil Group, Greg McKelvey said that it isn’t just about improving functionality, it is also about branding and design. He added that there was plenty of opportunities for growth as a lot of their watches and jewelry could be used as connected devices. The publicly traded company will incorporate the technology used by Misfit into its own products, which bear resemblance to traditional watches rather than rubber fitness trackers and will introduce them around next year.
Mr. McKelvey said that they would also continue production of Misfit’s products. According to him, the startup’s innovation in terms of battery life was especially useful to them. As far as Fossil is concerned, they will be able to improve their product offerings with the help of this acquisition. In the first half of the year, their shipments have had a flat volume and its entry in this market is a bit unusual as most manufacturers of fitness trackers are now technology companies. The only exception is Nike Inc., which developed the FuelBand and it has reduced its plans for hardware development.
The round-faced sleep and fitness monitors called Shine that are manufactured by Misfit have had a fashion conscious design from the beginning. The first product of the startup was introduced in 2013 after a successful campaign and they had previously entered into partnerships with brands like Swarovski and Speedo. By combining with Fossil, the technology of the startup will benefit from the lineup of brands belonging to Fossil and its huge manufacturing and distribution capability. Around 50 million accessories and watches are sold by Fossil in about 150 countries. The companies didn’t disclose Misfit’s shipment volumes or revenue.