Google Buys $40 Million of Fossil Assets for Wear OS

on January 22, 2019 at 11:00 am

Smartwatches Using Google’s Wear OS; Kate Spade New York, Michael Kors, Fossil, Tory Burch

As of last week, Fossil announced its intention to sell its smartwatch intellectual property as well as its research and development division to Google for $40 million. Fossil manages 14 brands, including Kate Spade New York, Micheal Kors, and Tory Burch. Most of the 14 brands offer a smartwatch running on Google’s Wear OS. Despite the deal, Fossil notes that it is still going to develop wearable technology, retaining around 200 employees for R&D. Google and Fossil are describing the deal as a partnership, and the internet is theorizing that this partnership will lead to the development of a Pixel Watch. Fossil EVP Greg McKelvey said in a statement,

Fossil Group has experienced significant success in its wearables business by focusing on product design and development informed by our strong understanding of consumers’ needs and style preferences. We’ve built and advanced a technology that has the potential to improve upon our existing platform of smartwatches. Together with Google, our innovation partner, we’ll continue to unlock growth in wearables.

Google wants to bring over experienced engineers for a reason: the deal will result in the launch of a “new product innovation that’s not yet hit the market,” McKelvey told Wearable. The deal has not yet been finalized and is set to complete by the end of the month. It was also not announced when products for the partnership would be launched, although McKelvey has said that Fossil will be releasing several devices with the new technology through its brands.

The Pixel Watch Theory Explained

Google has made similar moves before. In the Fall of 2017, Google spent $1.1 billion to acquire more than 2,000 hardware engineers from HTC with the intent to bolster the development of Google’s Pixel smartphone, which launched about a year after the deal. Just as Google brought on Android hardware engineers to work on the Pixel smartphone, many are theorizing that Google is bringing on Wear OS engineers to help build out a Pixel smartwatch. Granted, this deal is of a significantly smaller scale, and the technology acquired in the deal is said to be broadly available. Wired reports that a Google spokesperson said the company plans to make the tech “available to its entire smartwatch partner ecosystem, and that timelines for releases will vary.”

Why Google Wear OS Needs an Update

Wear OS has received several updates in the past. Initially launched as Android Wear in 2014, Android Wear 2.0 was released in 2017. Then, in March of 2018 Google rebranded it to Wear OS. Wear OS also received an update in October 2018 to include a ‘proactive’ Google Assistant. None of the updates brought with it smartwatch market share, however. Statista reports that Apple held the market share of smartwatch unit shipments consistently from Q2 2015 through Q3 2017, only falling to 45% market share in the third quarter of last year. Google did not even make an appearance on Statista’s graphic — Apple’s biggest competitors are Samsung, Fitbit, and Garmin.

If Google wants to increase its wearable market share, it will need to do more than increase the presence of its Google Assistant. IDC senior research analyst Jitesh Ubrani believes that health is “quickly becoming the next frontier for wearable brands to conquer. With heavy regulation and greater scrutiny, this segment will likely be the one that staves off value brands, allowing the market leaders to further cement their lead.” Google could see this too. Could be why they are partnering with Fossil who also happens to own Misfit, a wearable and fitness tracker company, which Fossil purchased for $260 million back in 2015. The fact that Apple has made concerted efforts to position its smartwatch as a health tracking device and that Fitbit still remains one of the top companies in the market demonstrate that health and wearables are a solid business strategy. All signs point to the fact that we can expect to see a Pixel smartwatch in the near future, most likely starring Google Assistant as a voice-first health monitoring tool.

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