By Heather Clancy
November 4, 2016

Looking at the carnage in the stock prices of Fitbit and GoPro, which both gave disappointing guidance to investors this week, Fortune’s Aaron Pressman makes an important observation: Making hardware is hard.

He’s right. Fitbit and GoPro aim to position themselves as “ecosystem” plays, like Apple, Pressman notes. Here are a couple of problems with that. First, there’s Apple, which made the Flip, a fine digital video recorder, obsolete by incorporating videos into the iPhone. Apple might similarly vacuum up the market for wearable cameras and fitness trackers too. The other problem is capital. If you’re trying to sell at retail, including to Amazon (which appears to have menaced GoPro), it helps to have a strong balance sheet.

The irony is that Fitbit and GoPro are among the best. Each has profitably captured the imagination of consumers. Yet each is a small fry compared to the giants of consumer electronics.

On a related note, it’s worth looking a little more at what happens when tech giants buy tech minnows. Earlier this week I made the case for worthwhile tech acquisitions, despite the conventional wisdom that they don’t work. Some smart readers offered examples to buttress my argument.

Fortune startup watcher Kia Kokalitcheva, for example, sent me four smart buys privately held Snap has made: Scan, which became Snapchat’s “Snapcodes”; Looksery, the backbone of the “lenses” feature that Facebook has since copied; Vergence Labs, the foundation of Snapchat’s anticipated connected eyeware; and Bitstrips, maker of Bitmoji. “I’m totally addicted to sending ‘friendmoji’ to my roommates via the app,” Kokalitcheva tells me. I have no idea what she’s talking about, but I am persuaded by her argument.

Former Microsoft bigwig Steven Sinofsky reacted to my having knocked Microsoft’s acquisitions history by pointing me to some good deals. These include Forethought, which became PowerPoint, and Vermeer Technologies, which led to SharePoint.

Finally, venture capitalist Dana Settle of Greycroft praised Google for buying YouTube, especially in contrast to News Corp.’s acquisition of MySpace. “One invested heavily in” the company it bought, and the “other starved it,” she wrote. You can easily guess which was which.

Adam Lashinsky
@adamlashinsky
adam_lashinsky@fortune.com

BITS AND BYTES

Google officially rebuffs European antitrust accusations. The search and Internet company formally rejected EU regulators’ charges that it unfairly promotes its online shopping site by using its dominance in search. Now, the agency will decide whether to levy a fine of up to $7.4 billion. Google has until next week to respond to another set of charges related to its mobile operating system. (Reuters, New York Times)

Huawei is gunning for Apple. The Chinese company’s chief executive has a plan to create the world’s second-largest smartphone player within two years, a position currently enjoyed by the iPhone maker. One piece of the strategy to get there: a new high-end device called Mate 9 that includes artificial intelligence features similar to those offered by Apple and Samsung. (Reuters)

China adopts strict surveillance rules for video services. As of Dec. 1, video service providers are required to keep data about what their customers are watching for up to 60 days. And if someone watches a program deemed dangerous for “national security or social order,” the service provider must alert the government. (Reuters)

Steve Ballmer says Microsoft should have gotten into hardware sooner. The former Microsoft CEO, now owner of the Los Angeles Clippers, regrets not pushing his ex-boss Bill Gates into the smartphones and tablets business earlier. The company’s latest Surface hardware, including an all-in-one desktop, has been greeted with many positive reviews. (Bloomberg)

Data storage giant NetApp shrinks again. The company is eliminating another 6% of its workforce, as a cost-cutting measure, bringing its total to slightly more than 10,000. The cuts come on top of a 1,500-person reduction disclosed earlier this year. NetApp’s traditional hardware sales have been hard-hit as more businesses opt for cloud services outside their own data centers. (Fortune)

And, today’s chip-deal du jour. Lattice Semiconductor, which makes programmable chips used in connected vehicles, is being acquired in a $1.3 billion deal. The buyer is Canyon Bridge Capital Partners, which is based in California but primarily backed by Beijing-based China Reform Fund. (Reuters)

 


IN CASE YOU MISSED IT

Facebook Doesn’t Just Want to Copy Snapchat—It Wants to Be Snapchat, by Mathew Ingram

Intel Acquires VR Startup to Bolster Live Sports Effort, by Aaron Pressman

Light Bulbs Flash SOS in Scary Internet of Things Attack, by Jeff John Roberts

By the way, here’s your complete coverage guide to this week’s inaugural Fortune Brainstorm Health conference.


ONE MORE THING

Here’s the tech that powered the World Series stat machine. The idea behind the league’s Statcast is to follow a game in progress and assemble metrics such as player positioning, pitch speed, and batted balls. Then, it surfaces interesting findings to viewers—and managers. (Fortune)


MARK YOUR CALENDAR

AI World: Business applications for artificial intelligence. (Nov. 7-9; San Francisco)

TBM Conference: Manage the business of IT. (Nov. 7-10; San Diego)

DevOps Enterprise Summit: Develop and deploy software faster. (Nov. 7-9; San Francisco)

Humanity.ai: A conference for designers of bots and other artificial intelligence systems. (Nov. 10; San Francisco)

Drone World Expo: Commercial apps for unmanned aircraft. (Nov. 15-16; San Jose, Calif.)

AWS re:Invent: Amazon’s cloud conference. (Nov. 28-Dec. 2; Las Vegas)

Consumer Electronics Show: An annual conference and exhibition dedicate to the business of consumer technology. (Jan. 5-8, 2017; Las Vegas)

CIO Leadership Forum (West): Strategy in the age of digital disruption. (Feb. 26-28; Phoenix)

Google Cloud Next: Products and perspectives for developers and customers. (March 7-10, 2017; San Francisco)

CIO Leadership Forum (East): Strategy in the age of digital disruption. (March 19-21; Hollywood, Fla.)

This edition of Data Sheet was curated by Heather Clancy.
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