This Company Should Buy Under Armour
Updated: Nov 13, 2019
It is no secret that Under Armour is in a lot of trouble right now. Would it be so crazy to think that someone from Big Tech will step in?
Several years ago, it might have seemed like a very strange concept that a tech company such as Apple (NASDAQ: AAPL) or Google (NASDAQ: GOOGL) might purchase a sports data company. However, that’s exactly what happened this month, when Google bought Fitbit (NYSE: FIT) for $2.1 billion.
Granted, Fitbit is not an apparel company like Under Armour (NYSE: UAA) — it creates fitness trackers. Then again, Under Armour founder Kevin Plank has described his sportswear manufacturer as a ‘tech company’ in the past, and backed this up with several fitness tech company acquisitions over the past 3 years. Some of these acquisitions include MapMyFitness, and its largest app MyFitnessPal.
Through these acquisitions, Under Armour has amassed vast piles of data concerning user health, fitness tracking, habits, personal details, and more.
Until as recently as 2018, Under Armour has blitzed the fitness world, going as far as being described as the next Nike (NYSE: NKE). Growth has declined, however, with its stock at less than half of its all-time highs, and a recent federal investigation into the company’s accounting practices leaving Under Armour in a less than ideal position.
A ‘Crazy’ Solution
Why shouldn’t a Big Tech member buy Under Armour?
You might be thinking, ‘wouldn’t somebody like Nike or Adidas be more suitable?’ The short answer is, no, they wouldn't.
To start, Nike is in direct competition with Under Armour, and there would probably be a lot of antitrust opposition to such a purchase for fear that a monopoly might be formed. Nike also has a profitable model right now, with its stock up 100% in the past 5 years and 21% in 2019 to date. Things are working out for Nike, so why waste money on the competition that is failing?
That leaves me with Big Tech. The most suitable candidate’s that spring to mind are Amazon, Apple, and Google, but of those 3, Amazon is the outlier. Let me explain why!
The main reason that Apple probably would not buy Under Armour is because of its 3-year long partnership with Nike, which has led to special edition Apple Watch’s having Nike Sports Bands, as well as subscriptions to NikeLab – the company’s version of a fitness companion app. This partnership has been thus-far successful, and also brings together two brands at the top of their respective fields, as both continue to strive for ‘perfection’.
It would be unusual for Apple to throw away this partnership which has proven beneficial to both parties, but who knows?
Why not Google then? Well, the company just recently purchased Fitbit and this was met with some opposition over the acquisition being a simple ‘data-grab’, so another move for a data-heavy company like Under Armour is unlikely. The company’s flagship fitness app, ‘MyFitnessPal, has roughly 140 million users alone.
Then there is Amazon.
The e-commerce giant is so much more than just e-commerce now. Along with its music and streaming services, it has ventured into all manner of markets, including food delivery and health. One area where it is gaining some popularity is in its hardware division.
Amazon has ramped up its efforts with its latest hardware range and is seeking to catch up with market leader Apple. It’s tablet, the Fire HD 10, is receiving glowing praise from tech reviewers, while its Echo Buds earbuds have been touted as the next big competitor to the AirPods.
However, one hidden feature of its Echo Buds might hold a clue as to the intentions of Amazon’s hardware segment, by bringing its hardware into the lucrative health market, which is expected to be worth close to $180 billion annually by 2020.
Users found a hidden feature recently, which included software used to manage the Echo Buds, showing workout tracking as an option. By adding fitness tracking to its earbuds, Amazon could mark its first entrance into the fitness monitoring space, bringing it into more direct competition with the Apple Watch, and Google’s Fitbit. There has been no comment on this from the company.
By purchasing Under Armour, Amazon would be able to add the sportswear manufacturers huge pile of fitness tracking data to its arsenal.
However, Amazon won’t stop there. Jeff Bezos has never been shy about diversifying Amazon’s holdings and the $8 billion market cap of Under Armour would be very affordable for him. What began as a book store now operates a massive e-commerce empire, a hugely successful cloud network, healthcare, music and video streaming, and so on. By getting its hands on an already established apparel manufacturer, as well as having a massive distribution network already, Amazon could carve out a huge chunk of the potentially $570 billion global sportswear industry. Along with its huge $40 billion in cash reserves, there may be nothing stopping Amazon from throwing its full might at Nike.
Given Under Armour’s popularity in the past, and Amazon’s vast resources, Jeff Bezos’ tech giant is primed (pun intended) to take advantage of the company’s strife, diversify its portfolio, and gain access to millions of customer’s fitness data, an invaluable resource for a company looking to expand in the health market.
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