Google parent Alphabet said on Friday that it will acquire wearable company Fitbit for $2.1 billion. The announcement was made via a blog post by Google's senior vice president of devices and services Rick Osterloh.
The news comes days after reports claimed that Google was in talks to buy Fitbit to strengthen its wearable devices section. Following the news, Fitbit's stock rallied 16%. Google will pay $7.35 per share for the wearable's company in an all-cash deal.
Needless to say, the acquisition will add muscle to Google's wearable devices arm and put the company head to head with Apple. In the last few years, Apple has emerged as one of the leaders in the wearable devices market. On the other hand, Google hasn't tasted much success in the wearable devices category.
The wearable devices category is a relatively young market and Apple has been making its presence felt for quite some time now. In fact, in recent times, it is not iPhone but the wearable devices category where Apple has been witnessing its strongest category growth. Apple's wearable category comprises products like Apple Watch.
Google, on the other hand, has been long trying to penetrate this area but hasn't been successful in creating much of an impact. Earlier in January, Google went into a $40 million partnership with watchmaker Fossil to buy a large chunk of its smartwatch technology.
Also, Fitbit, despite having gained popularity in the wearable fitness devices category, has been witnessing fluctuations in its stock price for a while now, owing to growth in Apple's wearable devices category and a few of its own recent product failures. Fitbit's share price hit an all-time high of $51.90 in 2015. However, in August 2019, it hit an all-time low of $2.81 after hovering around $7 for the past couple of years.
Buying Fitbit is a strategic move by Google but it will also help the smartwatch company. Earlier in October, Google had shared its ambitions of exploring the health and hardware category with the launch of a series of products including the new Pixel 4 smartphone. The tech giant also hired David Feinberg, the former chief executive officer of Geisinger Health, to strategise and oversee it healthcare segment.