The company informed members of the 70-person hardware team which is 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.
The news didn’t take Wall Street by surprise. Developing hardware is costly and difficult. It takes years to turn a profit, if at all. Added to that, Nike competes against corporate giants with decades of expertise in hardware, such as Samsung and Apple.
Nike had planned to release a new, thinner FuelBand in the fall, but those plans have reportedly been shelved and the company won’t say whether there will be a new one. Nike has said it plans to continue supporting the current FuelBand for the “forseeable future” and that new color options will be available.
Although Nike said only a small number of staffers were laid off and it remains committed to the Fuel line of fitness products, the retreat seems odd for a company that has made its name in sports equipment, and has led to speculations that Nike may be working on a new partnership with Apple.
Jim Duffy, a Nike analyst with Stifel, Nicolaus & Company told CNET,
“Apple is in the hardware business. Nike is in the sneaker business. I don’t think Apple sees Nike as competitive, Nike would be content to let Apple sell devices, as long as they would be supportive of the apps.”
“Nike is committed to Nike+, to NikeFuel, and to driving innovations that bring richer experiences for all athletes,” KeJuan Williams, a spokesperson for the company, said in a written statement. “We will continue to leverage partnerships to expand our ecosystem of digital products and services, using NikeFuel as the universal currency for measuring, motivating and improving.”
Of course, it was always inevitable that Cook’s wrist would eventually sport an Apple-made device, and no other. Whether that particular device carries Nike software may be the next defining step for Nike in the world of wearables.