Google Makes a Big Leap by Fitbit Deal worth $2.1bn
After having developed its own smartwatch operating system, Watch OS, Google has now signed in a Fitbit deal that will potentially pull off the smartwatch maker from the financial challenges it has been facing in the past.
Facing losses since 2015, Fitbit has been looking for a buyer. Even though Facebook had shown interest in buying the wearable technology giant, it was offering a meagre amount as compared to what Google has offered now.
Speaking about the Fitbit deal, the Co-founder and Chief Executive of Fitbit, James Park said, “Google is an ideal partner to advance our mission.” Making a premium of about 19 percent to the stock’s closing price on October 31, the bid is valued at $7.35 a share.
Having worked as a CEO in the wearable technology for the past 12 years, Park showed great confidence in the acquisition. He said, “With Google’s resources and global platform, Fitbit will be able to accelerate innovation in the wearables category, scale faster and make health even more accessible to everyone.”
Even though the board and regulators are yet to give approval, sources claim that the Google and Fitbit deal will be finalised in 2020. The US regulators are seriously concerned about monopoly power. Analysts are sceptical that Google signed the Fitbit deal to gain access of the “health and wellness” data of Fitbit users.
The wearable maker has affirmed that the data will not be used for “Google adverts and pledged to maintain strong privacy protections.” Even though the amount being paid is huge in comparison to the $1.4bn market value of Fitbit last week, the investment will bear sweet fruits for Google in future.
In order to clarify doubts about privacy protection, the Information Commissioner’s Office (ICO) and Competition and Markets Authority(CMA) are facing calls to look over the matter from Tom Watson, Labour Deputy Leader. As per him, the Fitbit deal will give Google highly sensitive personal health data on millions of people and that should worry us all.” He added, “The CMA should halt and investigate this merger immediately.”
Speaking of the share market, Fitbit shares surged by 19 percent after rumours of the take over came up. This is a good news after the posted losses of $68.5m in the latest quarterly earnings made it difficult for the firm to keep its position in the market.
Recently, Fitbit aligned with Bristol-Myers Squibb and Pfizer to create educational content for individuals who are at a higher risk for atrial fibrillation. By doing so, Fitbit aims to ensure early diagnosis of the condition and the related risk of stroke.
In order to make the Fitbit deal a huge success, Google will have to ensure that all rules with respect to user privacy protection are adhered to.
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