Google Finally Doubling Down on Wear OS

Google has announced that it is buying wearable tech intellectual property rights - along with an un-named number of engineers – from the Fossil Group for $40 million. This move could indicate that the tech giant is finally getting serious about the development of its Wear OS platform after seeing its share of the smartwatch market fall below 25 percent, according to NPD’s latest Consumers and Wearables survey. The purchase of Fossil IP could also lay the groundwork for the eventual launch of a long rumored Google branded Pixel smartwatch.

The end game
Fossil first got truly serious about wearable tech in November 2015 when it bought Misfit for $260 million. That acquisition gave Fossil the technology IP and engineering team to roll-out a large number of smartwatches and hybrid traditional watches under the Fossil name, as well as under partner brands such as Kate Spade, Michael Kors, Skagen, and Emporio Armani, over the last three years. In fact, Fossil is now the number one Wear OS-based smartwatch maker in the U.S. market, with players such as LG losing share and others, like Motorola, abandoning the market.

While Google has been tight lipped about what IP was included in the deal, it is a near certainty that the company will look to integrate the Fossil IP and technology into the broader Wear OS platform for all of its partners to take advantage of. This is a welcome move for the Wear OS ecosystem, which has been floundering outside of Fossil. In fact, many of the issues that have plagued Wear OS-based smartwatch vendors comes from the fact that Google has been slow to update Wear OS with new features, functionality, and use cases in the face of strong competition from Apple and Samsung. With a renewed focus on the platform, Google will hope to strengthen existing Wear OS OEMs and bring new players into its ecosystem. However, if the platform continues to struggle, the acquisition of the Fossil IP could help pave the way for Google to enter the smartwatch market on its own with a Pixel branded smartwatch.

Fossil still committed to the smartwatch
While it is still unclear how much IP and how many engineers Fossil is transferring to Google, the company will remain heavily committed to wearable tech. In fact, it has been made clear on recent Fossil earnings calls that its smartwatches and hybrid watches are the only categories in its line-up that are showing growth. Fossil EVP Greg McKelvey reaffirmed this commitment to wearable tech in a statement and indicated that the technology transferring to Google was a, “new product innovation that has not yet hit the market.” This statement appears to back up Google’s plan to bring this new Fossil smartwatch innovation to the broader Wear OS community.

The verdict
The acquisition of Fossil smartwatch IP by Google is a win for the entire Wear OS ecosystem. However, more important than just this acquisition is that Google is finally showing greater interest in investing in its Wear OS platform in the face of dwindling market share. Regardless, existing and potential Wear OS vendors are still likely to be skeptical of Google’s commitment to the space in the short term until they can see if this announcement really does accelerate the development of Wear OS. As a result, Google may need to ratchet up its wearable tech investments even further to accelerate the pace of the Wear OS platform development even more aggressively. This raises the possibility that the company is finally getting serious about a Pixel Watch. However, even if Google does decide to launch a smartwatch of its own, it would likely not launch until late 2019 or early 2020 at the earliest.