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Takeaway: Nike is pulling the plug on its fitness hardware.

Nike Gets Less Active, Fires FuelBand Team | $NKE -  dsc6181

CNET Exclusive: Nike fires majority of FuelBand team, will stop making wearable hardware

  • "Nike is gearing up to shutter its wearable-hardware efforts, and the sportswear company this week fired the majority of the team responsible for the development of its FuelBand fitness tracker, a person familiar with the matter told CNET."
  • "The company informed members of the 70-person hardware team – part of its larger, technology-focused Digital Sport division comprised of about 200 people – of the job cuts Thursday. About 30 employees reside at Nike's Hong Kong offices, with the remainder of the team at Nike's Beaverton, Ore., headquarters."
  • "It's unclear how many current employees, if any, have been internally recruited to join other Nike divisions. Nike Digital Tech, responsible for Web software, was not affected."
  • "As CNET reported on April 10, Nike had serious discussions in the last few months –after the release of the FuelBand SE tracker last November – about exiting the wearable-hardware market. The shoemaker isn't throwing in the towel on technology. Rather, it's turning away from hardware and realigning its focus exclusively on fitness and athletic software…"

Takeaway From McGough:

Nike is officially pulling the plug on its wearable tech initiatives. The announcement isn't all that surprising given that the FuelBand and Nike + SportWatch trail the offerings currently on the market – FitBit, Jawbone, Garmin, etc. – by a wide margin. It doesn't appear that the company is throwing in the towel all together, instead shifting its focus from hardware to software.

Let's be clear about one thing, Nike's software leaves a lot to be desired; the Fuel Point metric is an arbitrary calculation that doesn't translate to other fitness devices. If Nike outsources hardware to a third party – which it appears that it will given the new software-focused Nike + Fuel offices in San Francisco – perhaps it can focus its energy where it has some expertise (i.e., digital media as opposed to digital hardware) and close the gap with its competitors.

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Editor's Note: This is a complimentary research excerpt from Hedgeye Retail Sector Head Brian McGough. Follow McGough on Twitter @HedgeyeRetail

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