Fitbit swallowed wearable startup Pebble late last year and it has now confirmed that it made the acquisition at a bargain basement price.
Back in December 2016, when Fitbit's Pebble acquisition went through, the price of the deal was estimated to be between $34 and $40 million. However, Fitbit has now disclosed the real price of the deal and it was far lower than initially estimated.
Fitbit Pebble Acquisition Price
In its latest quarterly earnings report posted on Wednesday, Feb. 22, Fitbit reveals that it shelled out a mere $23 million for purchasing Pebble. That's what a real bargain looks like on the wearable market, especially since Fitbit decided to kill off Pebble's line of rival smartwatches. Simply put, Fitbit gobbled up its competition and took the rival products off the market.
This is the first official confirmation of the amount Fitbit paid to acquire Pebble, albeit it's been long speculated that the struggling Pebble sold its business at a fraction of what it was reported and what it received from its Kickstarter campaigns.
Nevertheless, $23 million is still considerably less than any reports had speculated the deal would be worth.
Fitbit Performance
Despite the bargain basement price it negotiated for Pebble, however, Fitbit can't gloat too much because it's not in a great spot either. Fitbit reported a decline in holiday sales, selling only 6.5 million devices during the October to December period, marking a significant drop from the 8.2 million sold during the same period the previous year. Fourth quarter revenues were also down 19 percent year-on-year in 2016, topping out at $573.8 million. For all of last year, however, Fitbit saw a 17 percent increase in sales, reaching $2.17 billion.
Fitbit still took a $146 million blow in the final quarter of last year, and a $103 million loss overall for the whole 2016, despite the overall increase in sales, price reductions and rebates, the bargain price of acquisitions and more such things going in its favor.
Just late last month, Fitbit confirmed plans to lay off 110 employees in a bid to stay more "focused and efficient." This reorganization and workforce reduction is expected to cost Fitbit roughly $4 million in the first quarter of this year alone.
Fitbit expects to incur more losses in the coming quarter and year. The company has projected annual revenues to drop between $1.5 and $1.7 billion in 2017.
Pebble eventually sank despite its success in 2015 because it failed to live up to the competition. As the wearable market gained momentum and major players such as Samsung, Apple, LG and more got in the game, Pebble started losing ground fast and it eventually remained just a pebble in a much bigger sidewalk.
It remains to be seen whether Fitbit will have a better fate in the end, but for now it also seems to be struggling in the face of increased competition. More wearable devices are expected to hit the market this year and the new generation should consist of more powerful and attractive gadgets, so Fitbit has a tough road ahead, even with Pebble under its belt.
