Fossil buys Misfit Wearables for $260 million to reverse decline

Fossil announced recently that it is purchasing Misfit Wearables for a cool $260 million, further proving established brands in the fashion industry see wearables as too important to ignore. Misfit is perhaps best known for its minimalist approach to wearables, such as its Shine fitness tracker that contains no display, just small LED lights displayed on a round surface serving as, among other things, a watch. Fossil sells more traditional watches but the company’s revenue missed expectations in the third quarter and it cut its 2015 forecast. Fossil CEO Kosta Kartsotis identified wearables as one reason the “traditional watch category remains sluggish.”

The Misfit acquisition makes sense for a company such as Fossil. Sonny Vu, the Misfit Wearables CEO who will stay on after the acquisition, has emphasized in the past that Misfit focuses on fashion and design. He discussed the convergence of fashion and wearables at the fall 2014 Global Sources Mobile Electronics show, saying that wearable devices must be “truly wearable,” which means they can be worn for long periods of time without concern for battery life. If there’s even a 1 percent chance a user won’t put a device back on after removing it, that could lead to a product’s failure over a long period of time, he said. To Vu, it makes sense for the fashion industry to focus on single-purpose devices that are not very power-hungry. This makes the acquisition by Fossil, a company known for its watches, wallets and belts, seem like a very shrewd business move.

In some ways, this purchase also shows that there remains a lot of room for growth in the wearables market. While the Apple Watch has sold well relative to other smart watches, consumers as a whole haven’t flocked to buy the product or something similar. Vu recognized that the most capable wearables on the market would be plagued by short battery life and leave many users wanting a simpler experience. Misfit is only four years old. The Apple Watch is still on its first generation device. There is a lot of room for innovation in the wearable space and there are many fashion companies who need that innovation to stay competitive.