Fossil buys quick fix, $260m Misfit opens wearable tech doors

Misfit's Swarovski Shine Collection

Misfit’s Swarovski Shine Collection

The problem facing the watch sector came very clearly into focus yesterday. First, Fossil reported sales down 17% in the latest quarter and lowered its outlook for full-year sales as its watches business proved weak.

Second, it said it was paying $260m to buy wearable tech company Misfit to boost its presence in smartwatches.

And there you have it. Traditional/fashion watches have been struggling for years as so many of us tell the time using those never-leave-our-side smartphones.

The company’s shares fell 13% after it cut its outlook but managed to regain some ground on the Misfit news. So what’s that all about?

Misfit founder Sonny Vu will serve as chief technology officer of connected devices for the group and Fossil CEO Kosta Kartsotis said the acquisition and Vu’s arrival give Fossil “a significant opportunity to add technology and connectivity across our platform of watches and accessories. Fossil Group will be uniquely positioned to lead the convergence of style and technology and to become the fashion gateway to the high-growth wearable technology and connected device markets.”

He also said the acquisition “will enable [the] group to expand its addressable market, offering consumers both traditional timepieces and fashionable connected accessories. Misfit brings … a scalable cloud and app platform, a world-class software and hardware engineering team, a native wearable technology brand and a pipeline of innovative products.”

So, to translate the corporate-speak, it means Fossil will own a tech platform that has already solved many of the hardest problems in wearables, including battery life.

It will let it use the Misfit tech across Fossil, Skagen and a number of its 16 brands next year, speeding up its move into connected accessories.

And it will increase the size of its addressable market with new distribution channels, new products, new brands and new business partnerships, including music, fitness, healthcare and digital entities.

So the company obviously thinks wearable tech will be key for the future, despite its relatively slow take-up so far.

Its strategy chief Greg McKelvey said: “We fundamentally believe consumers care about both technical functionality and fashionable design. In fact, one without the other is simply not enough. With the acquisition [we] will be positioned to win with the connected consumer.”

For now, we can only wait and see.

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