updated 10:42 pm EDT, Fri April 18, 2014
Company to focus on software; surprise move may hint at Apple partnership?
In an unexpected move, Nike has opted to fire as many as 70 members of its Digital Sport division who were focused on hardware development and will not release a now-cancelled new version of the FuelBand fitness tracker that was expected this fall. The company will continue to support the existing FuelBand SE, but is otherwise planning to exit the wearables market just as it is gaining mainstream traction. The company plans to focus on software going forward -- possibly signalling a partnership with a hardware maker.
The unusual decision to fire the hardware team -- about half based in Hong Kong, the other half at the company's Beaverton, Oregon headquarters -- leaves some 130 people, mostly software engineers, in the company's Digital Sport division. The future of other products like the Nike+ Sportswatch and other hardware peripherals is likely bleak. Some of the hardware team are likely to join other Nike divisions, but some 55 people were laid off entirely, according to reports from CNet.
Apparently, executives in the company have decided to focus on fitness and athletic software, particularly in the face of increasing competition in the "wearables" market, and just last week set up a San Francisco-based Fuel Lab for other hardware companies to collaborate with Nike on the company's NikeFuel fitness system. The company will continue to offer Nike+ support for existing products such as those from Apple, and issued a statement saying it will "continue to improve the Nike+ FuelBand App, launch new Metaluxe colors, and we will sell and support the Nike+ FuelBand SE for the foreseeable future," said spokesperson Brian Strong.
"The Nike+ FuelBand SE remains an important part of our business," he added. "As a fast-paced, global business we continually align resources with business priorities," Strong told CNet in an email. Still, the company's move to deprecate its own popular Fuelband health tracker will take many customers by surprise. One that likely won't be shocked by the move, however, is FuelBand wearer and Apple CEO Tim Cook -- who sits on Nike's board of directors.
Tim Cook discusses Nike FuelBand at D conference
Some have speculated that Nike's exit from wearables will dovetail with Apple's entry into the field, as it is expected to produce the long-rumored "iWatch" that may take the company further into the health and fitness arena than its current relationship with Nike, which supports the Nike+ sensors on iPods and includes some of that same technology in the latest iPhones.
"Apple is in the hardware business. Nike is in the sneaker business. I don't think Apple sees Nike as competitive. It's likely that an Apple hardware offering would be supportive of the Nike software," said investment analyst Jim Duffy. Strong noted that Nike has "been working with Apple to develop products since 2006, when we introduced Nike+ Running," adding that the company has several Nike+ iOS apps available.
While the company would be unlikely to limit themselves to just working with Apple, Duffy sees Nike as being "content" to let Apple or other companies sell the hardware as long as such devices supported Nike software. "Partnering with industry-leading tech companies is nothing new for Nike," Strong points out. As pointed out in the report, the move was predicted a week ago on the tech-gossip site Secret, where an anonymous contributor claimed that the engineering team would be let go "mostly because the execs committed gross negligence, wasted tons of money, and didn't know what they were doing."