Big tech is under the microscope again. Google’s planned acquisition of fitness hardware-maker Fitbit (FIT), hit a regulatory hurdle on Tuesday. The European Commission has opened a full-scale probe to determine whether the transaction could result in the search engine giant further consolidating its position in the online advertising market.
Specifically, the regulators main concern revolves around how Google will use Fitbit’s user data for personalized ads
Google, in turn, had already tried to ease concerns by offering to make a legally binding commitment to the EU Commission that it won’t make use of Fitbit’s data for ad targeting. It has also said it will give Fitbit users the right to remove or delete their data. But the probe implies the EU was not satisfied with the offer.
Last November, Google and Fitbit entered into an agreement for the search giant to acquire the popular wearable device company for an estimated $2.1 billion. The news was immediately met with criticism from privacy-right groups concerned about users’ privacy due to the device’s storage of health data.
Google has long seen the lack of penetration in the wearables market as a hole in its portfolio. The acquisition could provide Google with an entry card into the $3 trillion health care sector. Medical researchers and health insurers are some of those who could benefit from Google’s extensive data reserves.
Although Deutsche Bank analyst Jeffrey Rand is not surprised by the pending investigation, it is nonetheless “not great news.”
Rand said, “The probe could delay the closing of this deal by up to four months and paired with concerns by regulators in the U.S. and Australia, there remains significant hurdles before a deal can close. We continue to believe a deal eventually gets reached, although our conviction level has definitely wavered some. We also believe that Google will have to make further concessions with its use of Fitbit data, but that eventually Google will come to an acceptable agreement with regulators that allows for the completion of this deal.”
All in all, Rand keep his Hold rating on Fitbit. The analyst has a $7.35 price target on the stock, implying possible upside of 15% from current levels.
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis and to consider your own personal circumstances before making any investment.
