Google Re-Acqui-Hires Smartwatch Engineers

By Evan Niu, CFA Markets Fool.com

Image source: Cronologics.

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Sometimes it pays to leave and come back -- at least if you're leaving to start a company that subsequently gets acquired by the company you left.

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) has just acquired Cronologics, a small smartwatch start-up that had been working to create another smartwatch operating system, Cronologics OS, which was based on Android. (The market probably didn't need yet another platform.) The company was founded in 2014 by a pair of ex-Googlers that were part of the Android team, Lan Roche and Leor Stern. Roche spentsix years at Google, while Stern was at the search giant for about a decade. Several other members of the Cronologics team were also hired away from Google. The team will join Android Wear, of course.

Interestingly, Cronologics was going to rely heavily on Amazon.com's (NASDAQ: AMZN) Alexa platform instead of Google services, and the company announced its first product, the CoWatch, earlier this year. The e-commerce giant was not officially part of the CoWatch's development, but Amazon opened up the Alexa platform in 2015, paving the way for this sort of thing. Financial terms were not disclosed, but the ex-Googlers are likely getting a nice pay day that beats their former salaries. It's not clear how much funding Cronologics had raised.

Turmoil everywhere

The timing of this deal is particularly interesting given what's been happening in the smartwatch market. The market is already hitting a wall, as companies have yet to prove why an average consumer should adopt wearable technology. There's even been some minor consolidation in the space, and the market's viability remains an open question.

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A couple months back, Google also said it was delaying the rollout of Android Wear 2.0 to 2017 in order to focus on quality. The new version was previously expected in the fall. Within the platform, even major original equipment manufacturers (OEMs) are wary. Samsung unofficially abandoned the platform in May in order to focus on its homegrown Tizen OS, which it's been working on for years. Motorola says it is effectively exiting the market, after being a first mover with the Moto 360. Huawei has been on the sidelines throughout the year, and LG launched just one Android Wear product in early 2016.

The company obviously still needs to refine its strategy, as Google needs its hardware partners to distribute its operating system. While bringing the Cronologics team back to Mountain View will help accelerate development and improve quality, the issues holding Android Wear back are likely strategic in nature. The biggest difference between Android Wear and Android is that there's a lot less UI customization available to OEMs, which directly limits hardware partners' ability to differentiate. It's probably better for users this way, promoting consistency across the platform, but it essentially kills what little pricing power that OEMs would have otherwise.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Evan Niu, CFA has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.