On Friday, CNET reported that Nike Inc (NYSE:NKE) is shutting down the hardware segment of its FuelBand division, and today, there’s at least a partial confirmation of that. Re/code reports that Nike has confirmed a “small number” of layoffs in its digital sports segment. However, the company also told the website that they would keep improving the Nike+ FuelBand App, launch new METALUXE colors and “sell and support the Nike+ FuelBand SE for the foreseeable future.”
Nike may not launch more FuelBand hardware
Re/code notes that the statement they received from Nike Inc (NYSE:NKE) does appear to leave open the possibility that the company won’t release more FuelBand products. The website’ source said Nike may want to just run through its device inventory or that it may not have decided that it wants to completely shut down the division.
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Sources further said that Nike Inc (NYSE:NKE) has been talking about what to do with the FuelBand segment for months, citing high expenses, problems with manufacturing, and low margins. They also said the company hasn’t been able to attract a very high level of engineering talent. Even Apple Inc. (NASDAQ:AAPL) has been stealing from Nike’s FuelBand team.
For example, Nike Inc (NYSE:NKE) still hasn’t developed an app for Android, which is a big problem and may be preventing some from buying it. In addition, data processing is a problem for the company, and there are some big changes coming within the wearable device industry, like the addition of multiple sensors.
FuelBand may partner with Apple instead
Apple Inc. (NASDAQ:AAPL) CEO Tim Cook has expressed his support for Nike Inc (NYSE:NKE)’s FuelBand and actually serves on the company’s board. He has also been seen wearing a one of the smart watches, and many have taken this as a signal that Apple must be developing a smart watch. Because of these connections, some now speculate that Nike will simply scale back the FuelBand division and instead become a software provider for Apple’s rumored smart watch.
Friday’s report from CNET suggested that as much as 80% of Nike Inc (NYSE:NKE)’s hardware team would be laid off, but the company did not provide a percentage in its emailed statement to Re/code.
Wearables market may be less profitable than expected
The problems with Nike Inc (NYSE:NKE)’s FuelBand division are leading to questions about the viability of the wearable devices market, according to Re/code. Numerous companies have brought similar devices to the market in the last few months. However, what’s still unknown is how much demand exists within the mainstream market. Insiders within the wearable device market say usage among those who do buy the devices usually drops off significantly within just months or even weeks of their purchases. In addition, it’s unclear just how much of an impact such devices have on the lives of the wearers.
In spite of the problems in hardware, it doesn’t sound like Nike Inc (NYSE:NKE) will entirely abandon its FuelBand division. Just this month, the company opened its Nike+ Fuel Lab. Executives have also said they will keep trying to expand the ecosystem.