Dive Brief:

• Google is buying Fossil Group's intellectual property related to its smartwatch technology in a $40 million deal that appears to be aimed at giving Google more of a hardware play in the smartwatch market, according to a Fossil press release.

• As part of the deal, some members of Fossil Group's research and development team also will join Google, though after the sale, Fossil will still have more than 200 employees on its R&D team working on innovation and product development, the press release stated.

• The acquisition comes as Google is in the midst of rolling out and planning new updates to its Wear OS software (formerly Android Wear) for wearable devices, according to 9to5 Google. Those updates include Wear OS 2.3 and another update that reportedly will bring several new features to the OS.

Dive Insight:

Google has been a player in the smartwatch market from the beginning, although through software, not hardware. It began that effort with the Android Wear operating system for smartwatches, which early in 2018 was rebranded as Wear OS as Google began integrating capabilities of the system more directly with Google Assistant, GoogleFit and the Google Play app store.

However, as we have seen in recent years, the internet giant is moving more into consumer products markets, creating devices like the Google Home smart speaker, Chromecast TV dongle and Pixel smartphones. So, a move like this should not come as a complete surprise.

Though Google did not trumpet any plans for new smartwatch products that could result from this acquisition, this appears to be the next market in which it will produce gadgets to go along with the software it provides to everyone else. The company is even taking a similar path into the smartwatch hardware market that it took to bolster its growing position in the smartphone market last year when it acquired the smartphone design business of HTC.

A little over two years ago, Fossil was struggling under falling sales of traditional watches and declining foot traffic through its own stores, which forced it to close stores. The company saw smartwatches — still a wobbly emerging sector at that point — as a way out of those troubles, and has since created smartwatches across 14 brands, sometimes with partners like Kate Spade.

This segment is now the company's fastest growing category, and it emphasized that the intellectual property sale does not signal any kind of retreat. The watch brand may have just seen an opportunity to cash in on some of the development work it has done in this market in recent years. In the last couple of years, it has produced several watches that used Android Wear/Wear OS, and it appears Google and Fossil will continue this fruitful relationship after this particular deal closes.