Exclusive: Nike FuelBand engineers courted by Nest, Oculus, Intel, and Microsoft

Sarah Tew/CNET

• by Nick Statt 
   @nickstatt

Nike engineers and other hardware and manufacturing experts from the company's FuelBand team are at the top of the recruitment list for high-profile tech firms racing to deliver new products in emerging categories like wearable technology.

Smart-device-maker Nest, now owned by Google after a $3.2 billion acquisition in January, is among the first in line to scoop up Nike members who were let go. Nest reportedly flew members of its team to Nike's worldwide headquarters in Beaverton, Ore., on Thursday, according to a story by TechCrunch. Nest, the maker of smart thermostats and Internet-connected smoke detectors, set up an "impromptu interview session" at a local hotel to gauge the interest of FuelBand engineers in joining its team in Palo Alto, Calif.Last week, Nike fired a majority of its wearable-hardware team -- as many as 55 people in the 70-person unit -- within its Digital Sport division, CNET has learned. Nike CEO Mark Parker todayconfirmed that the company is shifting its focus to software. Many FuelBand employees are staying on at Nike through the end of May, which marks the end of the company's fiscal year.

This flyer, provided to TechCrunch by an anonymous tipster, was allegedly handed out to Nike employees at its Beaverton, Ore., headquarters Thursday.TechCrunch

Microsoft, Intel, and virtual-reality gear maker Oculus VR, which was acquired by Facebook last month, are also pursuing members of the FuelBand hardware team, a person familiar with the matter told CNET.

Apple recruiters have also been in talks with Nike Digital Sport members since Nike began development on the FuelBand in 2011, the person said, but it's unclear what relationship the sportswear company has been building with Apple regarding the iPhone-maker's rumored wearable, which is either a smartwatch dubbed the iWatch or a FuelBand-like fitness band. That puts poaching efforts by Apple up in the air, though Nike's CEO Parker has hinted at a partnership.

"I will say that the relationship between Nike and Apple will continue," Parker told CNBC Friday. "And I am personally, as we all are at Nike, very excited about what's to come."

Whether that means Apple has a fast lane to hiring members of the FuelBand team when they do depart Nike is uncertain, the person said.

What would all those other companies want with the architects of an activity tracker?

Oculus, bought by Facebook in a deal worth $2 billion, is flush with cash and eager to expand. It's also trying to take its virtual-reality headset -- which has gone through two developer-kit iterations alongside its second-generation Crystal Cove prototype -- and deliver a consumer product soon. Nabbing hardware engineers would accelerate that process, and Nike's team members come with years of wearable-hardware experience.

Nike has never disclosed sales figures of its FuelBand, but in 2013 the device captured 10 percent of the wearable fitness-tracker market sold through e-commerce and brick-and-mortar retailers, according to the NPD Group. However, Nike sales through its own website and Apple's online store accounted for a majority of FuelBand sales throughout the last two years, the person familiar with the matter added, meaning the 10 percent figure that would appear to tip the scales toward a Fitbit and Jawbone lead in the market is not a fully accurate picture.

As for Nest, the Google-owned startup is now reportedly responsible for more than just smart home devices. After being folded into a new Google hardware division responsible for the company's physical product efforts, Nest, led by Apple's former iPod chief, Tony Fadell, may soon -- or already -- be working on Google tablets and smartphones, even wearables. The recent release of Google's wearable-specific mobile operating system Android Wear makes the possibility of new wearables more likely.

Intel's interest in FuelBand members also makes sense. The company has been investing heavily in the wearable market through key acquisitions like the March 2014 takeover of Basis Science, makers of the Basis Band line of smartwatches. Intel also led funding rounds for Google Glass competitor Recon Instruments and armband-maker Thalmic Labs last year, and is designing its own line of wearable-device chips, called Quark.

At the Consumer Electronics Show in January, Intel CEO Brian Krzanich said the company had been working on wearable projects for six months -- including a smartwatch, and earbuds with a built-in heart-rate monitor -- and planned to deliver those products this year.

Though Microsoft has yet to make a move into the wearables market, it's making significant steps to do so soon and has long invested in experimental research. Last October, ZDNet reported that Alex Kipman, head of Xbox incubation and a leading visionary behind the Kinect camera and sensor, began work at Microsoft's "new devices" division, which is reportedly working on wearables including a Google Glass competitor called Kinect Glasses. In December, The Verge reported that Kipman was working on optimizing Windows software for smaller screens, including a headset and a smartwatch.

The latest piece of the Microsoft wearable puzzle is the company's purchase of $150 million worth of intellectual property assets from Osterhout Design Group, a wearable manufacturer mainly contracted by the government for products used in military operations. So it would appear that wearable engineers are on Microsoft's radar.

While the FuelBand wind down has resulted in jobs lost and an internal redirection toward software, those same engineers who spent years building one of the leading fitness trackers -- and taking Nike to the forefront of the market while transforming its image as a corporation -- will be able to continue pushing the wearable frontier. That the Nike employees will be landing on their feet is a win for everyone, said the person familiar with the matter.

Nike Says The FuelBand Isn’t Dead, New Color Options Coming

Nike was said to be shutting down its FuelBand department on the heels of layoffs on Friday, signalling a significant exit of the wearable fitness device market by one of the more prominent companies involved in the space. That’s not quite true, however, according to information provided to Re/code by the company.

There were indeed some layoffs, Nike confirmed, but it also said it’s still committed to the Nike+ FuelBand SE, plans new color options for the gadget and should support it and continue to sell it for the foreseeable future.

Nike plans to continue with its original plan of adding to the Silver and Rose Gold ‘Metaluxe’ edition Nike+ FuelBand SE models with the addition of colorways. It doesn’t mention anything regarding hardware beyond the current generation FuelBand models, however, which could indicate that its commitment to its wearable devices extends only as far as this particular gadget.

There has been some speculation that Nike plans to shift focus to software in the future, and possibly support the hardware efforts of others, including Apple. Apple is rumored to be working on an iWatch with health-tracking features, and its CEO Tim Cook sits on Nike’s board of directors.

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

Sarah Tew/CNET

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.

"As a fast-paced, global business we continually align resources with business priorities," Nike spokesman Brian Strong said in an email. "As our Digital Sport priorities evolve, we expect to make changes within the team, and there will be a small number of layoffs. We do not comment on individual employment matters."

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.

Nike's Digital Sport hardware team focused on areas like industrial design; manufacturing operations; electrical and mechanical hardware engineering; and software interface design. Products included not only the FuelBand but also the Nike+ sportwatch and other, more peripheral sport-specific initiatives.

Of those 70 employees, about 70 percent to 80 percent -- or as many as 55 people -- were let go, the person said, asking not to be identified because the information was confidential. Some of the employees will be staying on at Nike through May. 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 early as this fall, Nike planned on releasing another iteration of the FuelBand -- an even slimmer version -- but cancelled the project. And it appears to have shelved all future physical product projects under the Digital Sport helm, the person familiar with the matter added.

Nike will not, however, stop selling the second-generation FuelBand SE for now, the company confirmed. "The Nike+ FuelBand SE remains an important part of our business. We will continue to improve the Nike+ FuelBand App, launch new METALUXE colors, and we will sell and support the Nike+ FuelBand SE for the foreseeable future," said Strong in a follow-up comment.

In fact, word of the firings made its way to Secret, an anonymous social network for gossip centered on the tech industry, as far back as a week ago. "The douchebag execs at Nike are going to lay off a bunch of the eng team who developed the FuelBand, and other Nike+ stuff. Mostly because the execs committed gross negligence, wasted tons of money, and didn't know what they were doing," the post read.

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, a strategic shift that would still benefit the company in the long run, analysts said. Nike's FuelBand SE currently sits at No. 35 on the CNET 100 leaderboard.

There's increasing competition in the market for wrist-worn fitness trackers, and Nike's digital app ecosystem, Nike+, has grown less reliant on wearables as smartphone sensors have improved. In other words, it makes less and less sense for Nike to stay in the hardware race when its physical wearables are not bottom-line needle movers, especially as companies like Apple and Google prepare to join the fray.

Just last week, Nike announced the launch of its San Francisco-based Fuel Lab. The testing space, born from its accelerator program, will join Nike's slew of other innovation-branded R&D havens where companies will be able to design hardware products that incorporate the company's proprietary point-based workout metric, NikeFuel.

Essentially, it will be a incubator for FuelBand successors, as long as they plug in to Nike+, for which Nike is publicly releasing an API this fall.

As Nike redirects its wearable efforts toward software, it's avoiding the competition from a bevy of new devices that will further crowd the market, namely the Apple "iWatch" and devices running Google's recently unveiled Android Wear operating system, designed exclusively for watches and other wrist-oriented wearables.

As Apple enters the fray, Nike has a potential partner. Apple CEO Tim Cook, who was seen wearing a FuelBand at the company's launch of the iPad Mini in October 2012, sits on Nike's board, and has for the last nine years. That relationship has been fruitful, helping Nike enter the wearable market as early as 2006 -- with the Nike+iPod shoe-sensor package -- with a strong brand partner.

A partnership, say analysts, would be a no-brainer. "Apple is in the hardware business. Nike is in the sneaker business. I don't think Apple sees Nike as competitive. It's likely that an Apple hardware offering would be supportive of the Nike software," Jim Duffy, a Nike analyst with Stifel, Nicolaus & Company, said when speaking with CNET last week. "Nike would be content to let Apple sell devices, as long as they would be supportive of the apps."

"Partnering with industry-leading tech companies is nothing new for Nike," Nike's Strong said. "We have been working with Apple to develop products since 2006, when we introduced Nike+ Running, and Nike has since created iOS Apps including Nike+ Training Club, Nike+ FuelBand and Nike+ Move."

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.