Just last week Alphabet [NASDAQ:GOOG] — or Google as I still tend to call it — released a new suite of products.
And although the company dropped the ‘Google’ name for the parent company, they’re clearly not averse to using it to promote their new line of hardware.
Google Home Mini, Google Home Max, Google Clips, Google Pixel Buds, to name a few.
The star of the show was the release of a Google phone and notebook. It’s called…no not Google, but Pixel.
Although if you’ve seen the TV advert, you will know they advertise it using a series of Google web searches about what people want in a smartphone…
I’m sure this all makes sense at a higher level of marketing than I can work out.
Anyway, the main point is this.
In amongst this plethora of new products, there was no new smartwatch.
At the same time, the ‘Android Wear’ section of the Google store disappeared. Along with the LG Watch collection, which integrated with the Google Now voice activation system.
As Sherlock Holmes might put it ‘the curious thing was that the dog didn’t bark.’
In other words, it’s what didn’t happen that tells you more than what did happen.
Or maybe I’m reading too much into this.
Perhaps later releases will come in due time
But if Google…err sorry Alphabet are out of the Smartwatch hardware game, then this has interesting possibilities for some other companies.
Let me explain…
Clearing the field
The first obvious winner is Apple [NASDAQ:AAPL].
Although sales of the Apple smartwatch weren’t as high as some analysts expected, the overnight domination of this new market was clear to all.
In fact they sold twice as many smartwatches in their first year as they did the iPhone.
And anecdotally, I’ve heard anyone who has one really loves it.
But a bigger winner could be Fitbit [NYSE:FIT].
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You see Fitbit’s Ionic smartwatch works on both the IOS and Android systems. Whereas Apple’s product only works on their own iOS platform.
There’s a large swathe of Android users who wouldn’t consider buying Apple products. And that’s why Alphabet’s potential move out of the smartwatch business could be especially good for Fitbit.
The other big competitor in the Android smartwatch category is Samsung [OTC:SSNLF], with its S3 Gear Sport watch.
However, that watch is far behind Fitbit’s Ionic and Apple’s Series 3 in terms of its ability to track health data on a granular level.
Samsung has not been able to garner a large segment of the smartwatch market in the past, with only a 16% share, and does not appear to have the customer loyalty that FIT and AAPL enjoy.
Small opportunities in bigger moves
Whether or not Alphabet is getting out of the smartwatch industry is not certain yet. But the signs are that they well could be.
And it makes sense if they do.
Smartphones remain the main prize for the big players. There are still big markets in the emerging economies up for grabs. For example, the smartphone market is expected to grow at around 21% per year for the next five years in India.
But smartwatches are still worth keeping an eye on.
They have a loyal user base and are part of a larger trend in ‘wearables’ which is also growing at a double digit pace. Albeit from a smaller base.
As the big players concentrate on the big sectors, opportunities may open up in niche markets for smaller companies.
Investors who pay attention to such moves can find good opportunities that are just too small for the larger companies.
And if a small company can grow market share — and at the same time the big players misjudge the size of the potential market in these niche spaces — it could suddenly become a very attractive takeover target.
Which would be good news for any investor with the foresight to get in early.
Editor, Money Morning
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