Fitbit’s imminent deal to buy smartwatch maker Pebble will result in the cancellation of Pebble’s last few devices, the Time 2 and Pebble Core.
Fitbit’s acquisition is focused on Pebble’s software, not hardware, and the leading fitness band maker doesn’t intend to keep selling Pebble smartwatches, Bloomberg reported on Wednesday, citing anonymous sources. Customers who purchased the two models on Kickstarter will have their money refunded.
Update: Fitbit officially announced the deal on December 7, acquiring assets, personnel and intellectual property related to software. The deal excluded Pebble’s hardware products.
The deal will resemble Fitbit’s acquisition of parts of failing mobile payments startup Coin in May. In that case, Fitbit acquired only specific assets and intellectual property so it could add mobile payment features to its own wearable devices. Coin’s mobile wallet was discontinued.
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Fitbit (FIT) has had struggles of its own this year, as sales of its namesake health and fitness-tracking wearables have slowed. Acquiring Pebble’s software would allow Fitbit to make more full-featured smartwatches that can run third-party apps, allowing the company to better compete with Apple (AAPL). Meanwhile, Apple is increasingly focused on adding health and fitness features, while cutting the price of its entry-level watch to close to the price of high-end Fitbits.
Most Pebble employees will not be offered jobs at Fitbit and will get severance packages, Bloomberg reported. Pebble CEO Eric Migicovsky is expected to join Y Combinator, which funds startup tech companies, according to the report.
Whether the Pebble operating system and limited ecosystem of third-party developers will give Fitbit enough firepower to fend off Apple remains an open question. The tech industry has a long and messy trail of unsuccessful acquisitions of struggling firms on the cheap. And creating a viable third mobile operating system has proven impossible even for much larger companies like Microsoft @microsoft(MSFT)and Samsung (SSNLF).
Wall Street also appears skeptical that a Pebble deal will make much difference to Fitbit. Shares of the company, which lost more than one-third of their value after CEO James Park forecast weak fourth-quarter sales, have lost 5% since the first report of the deal emerged last week.