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Why Nike Is Better Off Ceding Wearables to Apple

Stocks in this article: NKE AAPL GOOG

NEW YORK (TheStreet) - If you've looked at the Nike+ FuelBand Facebook page recently, it's no wonder Nike (NKE) is rumored to be backing away from the wearable technology device, but this might be more of a blessing than a hindrance.

While the company has not officially announced anything, a CNET report on Friday said that Nike was laying off about 70 employees of its hardware team, which are a part of its larger 200-employee Digital Sport division.

CNET reported Nike was planning on releasing a slimmer version of the FuelBand this fall, but has canceled the project and shelved any future "physical" projects related to the device. Nike will continue selling FuelBand for now and is even reportedly coming out with new colors. Nike denied report to CNET saying that the FuelBand "remains an important part of our business." Nike+ FuelBand SE retails at $149 and up, according to the Nike+ Web site.

Employees at Nike Digital Tech, which is responsible for Nike's Web software, were not affected, the article stated. While Nike may be sticking to creating fitness-related software through its Nike+ platform, reports are also surfacing that Nike could be in cahoots to collaborate on the hardware side and signs are pointing to Apple (AAPL), specifically the upcoming iWatch. Apple CEO Tim Cook sits on Nike's board. The FuelBand is already incompatible with Google's (GOOG) Android system and Apple has been poaching experts to focus on its health-related software, according to Fast Company.

Nike may be ceding the wearable tech hardware niche to Apple, "but don't expect them to lay idle during the wearable device movement," says Brian Sozzi, CEO of Belus Capital Advisors and a contributor to TheStreet.

A partnership with Apple iWatch would free up Nike for "more focus and resources could be put into making a very strong app-based user experience. It's much more cost efficient compared to employing both hardware and software teams," Sozzi said.

Apple is rumored to be releasing the iWatch in the third-quarter and there has been no shortage of speculation as to exactly what the iEverything company will focus on in its wearable device. One big area is likely health and fitness as well as preventative health care. Other areas of focus could be industrial, military uses as well as infotainment, enhancing people's lifestyles. That said, Apple CEO Timothy D. Cook has acknowledged the fact that wearable technology needs to demonstrate why people should buy it, as opposed to just being another gadget.

"The wrist is interesting," Cook said at a 2013 tech conference, speaking with Walt Mossberg and Kara Swisher. "You still have to convince people it is worth wearing."

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