Intel (NASDAQ: INTC) is reportedly laying off part the staff of its wearables business, according to TechCrunch. That’s not too surprising, since the fledgling unit — which was built upon its acquisitions of fitness watch maker Basis in 2014 and athletic smart glass maker Recon in 2015 — has struggled this year.
In June, Intel recalled and discontinued its Basis Peak smartwatch due to overheating issues. It also plans to pull the plug on the Peak’s software ecosystem at the end of the year. Its planned successor, the Basis Ruby, is now unlikely to ever see the light of day.
The Key Facts
Intel established a wearables business amid its expansion into the Internet of Things (IoT) market — part of its effort to diversify its top line away from its PC and data center chip businesses. Sales growth has been sluggish in both of those saturated markets, and Intel’s heavily subsidized mobile push failed to make it competitive with market leader Qualcomm (NASDAQ: QCOM) in smartphones. With chips and modules for IoT devices and wearables, Intel had hoped to avoid ceding another market to Qualcomm and other ARM-based chipmakers.
To do so, it launched a $1,000 luxury bracelet called MICA, partnered with Fossil to develop fitness trackers and smartwatches, developed biometric earbuds with SMS Audio that measure a wearer’s heart rate, and partnered with Luxottica‘s Oakley brand on Radar Pace, a pair of smartglasses designed for athletes. However, Intel’s entire IoT business still only accounted for 4% of its sales and operating income last quarter.
Intel’s Not Giving Up on Wearables Yet…
Intel told TechCrunch that it was “in no way stepping back from the wearables business,” but declined to comment on the rumored layoffs. If Intel plans to stay in this market, it faces a tough battle ahead — Qualcomm claims that over 80% of Android Wear devices across the world are now powered by its slimmed-down Snapdragon Wear processors.
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Leo Sun owns shares of Qualcomm.
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