Nike: The First Casualty Of The Wearables Wars

| About: Nike Inc. (NKE)

Good Friday was anything but good for the engineers working on the Nike (NYSE:NKE) FuelBand. Up to 55 members of the 70 person hardware team were let go on Friday, putting the future of the Nike FuelBand fitness wearable in question. For the uninitiated, the Nike FuelBand is a "high-tech" wristband that exercisers can wear to track their steps taken and calories burned. As Friday's news may have tipped you off, there were some problems with the FuelBand and it is almost certainly not the future of wearable technology. But one day we could look back at it as an important predecessor.

The first problem for the FuelBand is that it's too expensive, and competitors sell similar products for way cheaper. Fitbit sells a smaller clip on wearable product called the Zip for $60, which can also track steps taken, distance traveled, and calories burned. The Nike+ FuelBand SE is an extremely similar product, but it sells for $150. If you're trying to sell an extremely similar product at 2 or 3 times the price of your competition, you'd better be a premium vodka brand if you want any chance at success.

Another challenge for the FuelBand was that smartphones could do what it does, but better. MapMyFitness (a subsidiary of Under Armour (NYSE:UA)) and RunKeeper are 2 great smartphone apps that show that you don't need a dedicated wearable device for witness when the smartphone you already own can perform just as well. As long as you have an iPhone with the RunKeeper Breeze app on you while working out, the app will do all the tracking for you without the fuss of wearing a monitor or wristband.

So why has Nike finally decided to scrap the FuelBand hardware team? It could be one or both of the reasons listed above, or it could be something else entirely. One hint that Nike left is that they told CNET that they would continue to focus on producing fitness software. Is this a sign that Nike sees a wearable war coming and wants no part in the hardware battle? It's possible, maybe even likely. One potential partnership and very good reason for Nike to get the hell out of the hardware business would be the long rumored iWatch.

Analysts have been dying to get a glimpse of the new products that Apple (NASDAQ:AAPL) CEO Tim Cook has promised this year, but Apple has kept its cards close to its chest. Everyone in the world thinks it will be a wearable device like a watch with biometric technology integration, but nobody knows for sure. The thing we do know is that Apple is one of the most successful hardware companies of all time and Nike would never want to compete with Apple on hardware if they knew Apple was preparing to enter the market. And Nike and Apple are in no other ways competitors, so Apple would likely be warm on integrating fitness software from Nike into the app store. So is this firing from Nike a sign that Apple is almost ready to release or at least unveil a wearable product? The truth is that nobody has a clue.

Disclosure: None