Jawbone Is Trying to Sell Its Speaker Business

Updated: May 27, 2016 6:39 PM UTC

Fitness tracker maker Jawbone has put its speaker business up for sale, according to multiple sources.

The company has been pitching potential buyers for its Jambox wireless speaker business so it can focus exclusively on its health and wearables business. At the same time, Jawbone has been working with third-party distributors to liquidate its remaining speakers in retail outlets, one source said.

Jawbone declined to comment.

Jawbone, a one-time Silicon Valley darling, has had a tough couple of years amid layoffs, competition with wearable companies like Fitbit and Apple, product delays, and executive shuffles. In November, Jawbone laid off 15% of its global workforce, or about 60 people.

Earlier this year, the company raised more cash, according to tech news site Recode. But Jawbone was only valued at $1.5 billion in the deal compared with $3 billion in its previous funding round in April 2015. A lower valuation, known as a down round, is a telltale sign of investor skepticism about a startup. Typically, startups try to do all they can to avoid being tarnished by such a funding.

Jawbone also became enmeshed in lawsuits with well-known contract manufacturer Flex (formerly Flextronics) and rival Fitbit. In 2014, Flextronics sued Jawbone for breach of contract and claimed in a lawsuit, which has since settled, that Jawbone’s troubled financial position prevented it from paying Flextronics $20 million it was owed. In 2015, Jawbone sued Fitbit over leaked trade secrets as well as patent infringement. Jawbone recently suffered a small loss in the ongoing lawsuit when a judge ruled in Fitbit's favor over the patent dispute. However, Jawbone's suit that alleges Fitbit (fit) stole trade secrets continues.

Last year, Fortune profiled Jawbone and its CEO, Hosain Rahman, revealing some of the company's struggles.

Jawbone is best known for its Up fitness trackers, a wrist-worn device that tracks things like steps taken, sleep, and heart rate. But the company also has a speaker business, which debuted in 2010, and produced several different sizes of wireless speakers. Although it was an early entrant into Internet-connected portable speakers, it's a market that is saturated with competitors including established companies like Bose. As of last year, Jawbone’s share of the speaker U.S. market dwindled to 5%, prompting the company's co-founder and chairman, Alex Asseily, to tell Fortune's Adam Lashinsky that selling the non-wearable business would be “painful” but prudent.

“Over the last year we’ve come to terms with the fact that our future value is focused on wellness,” Asseily said. “Audio is great, and I think our audio products, particularly Jambox, are sexier. But it’s not as big a market.”

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The big question is whether Jawbone will find a buyer for the business and, if so, at what price. It's unclear who the potential buyers may be.

The market for health trackers and wearables is strong. Jawbone's Up fitness trackers debuted in 2011, and currently the company offers four versions of the tracker. Recently, Jawbone appointed a chief medical officer, Dr. David Benaron, to oversee its health initiatives.

But Jawbone also faces stiff competition in wearables from Fitbit, Apple, Xiaomi, and Samsung, which are all ahead of Jawbone by shipments and market share, according to a report from research firm, IDC. Fitbit has a 25.9% market share in wearables followed by Xiaomi with a 15.4% share, and Apple with a 14.9% share.

Since its founding, Jawbone has raised hundreds of millions in venture capital from marquee investors including Khosla Ventures, Andreessen Horowitz, Sequoia Capital, and Kleiner Perkins. The company counts Yahoo CEO Marissa Mayer as a board member.