If Fitbit's  (FIT) disappointing third-quarter sales and very poor fourth-quarter guidance made it clear that wearables have failed to live up to their massive 2015 hype, Fitbit's acquisition of smartwatch pioneer Pebble, together with the backstory surrounding the deal, makes it official that the hype cycle is over.

Pebble, which launched its first smartwatch in 2012 (three years before the Apple Watch arrived), was sold to Fitbit for a price between $34 million and $40 million, according to a source talking with TechCrunch. That's less than the $40 million-plus Pebble has raised over its history via crowdfunding site Kickstarter, and -- in spite of Fitbit's big 2016 losses -- equal to about 2% of Fitbit's market cap.

What's worse, TechCrunch reports Pebble turned down a $740 million offer in 2015 from high-end watchmaker Citizen. The company also reportedly rejected a subsequent $70 million offer from Intel (INTC)  The chip giant, which in recent years has bought fitness watchmaker Basis and heads-up display maker Recon, was recently reported to be laying off a chunk of its wearables team and to have shelved plans to launch a new Basis smartwatch aimed at women.

Given all of this, it might only be a matter of time before watchmaker Fossil (FOSL) takes a write-down on its $260 million 2015 purchase of wearables firm Misfit. And unless its non-smartwatch products prove very successful, Nokia  (NOK) might struggle to make its $191 million spring acquisition of French wearables/fitness hardware maker Withings pay off.

Recent sales estimates suggest Pebble was in dire straits. Research firm IDC estimates the company shipped only 100,000 smartwatches in the third quarter, down from 200,000 a year earlier. Competition from Apple (AAPL) , Garmin (GRMN) , Fitbit, which launched its Blaze smartwatch in early 2016) and Samsung (SSNLF) didn't help.

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But neither did the fact that smartwatch sales in general have been soft: IDC thinks industry shipments fell 52% in Q3 to just 2.7 million. Declining Apple Watch sales are believed to be a key reason Apple's "Other Products" revenue, dwhich covers the Watch, Beats headphones, iPods, Apple TV set-tops and accessories, fell 22% in the September quarter to $2.37 billion. And while the September launch of the Apple Watch Series 2 might lift December quarter sales some, it's not clear if this will let Watch sales top year-ago levels.

The broader wearables market, buoyed by sales of standalone fitness trackers, appears to be in slightly better shape. IDC thinks total wearables shipments rose 26% in Q2 to 22.5 million (less than 7% of estimated smartphone shipments), with Fitbit claiming a market-leading 25.4% share. But Fitbit's Q4 guidance, which implies just 4% annual sales growth at the midpoint, suggests that fitness tracker growth is rapidly slowing.

To make a long story short, fitness trackers are niche products, and for the time being at least, smartwatches occupy an even smaller niche. Millions of fitness tracker owners enjoy using them...and many others seem to quit after a few montdssffhs or so. And even those who do active use them don't necessarily upgrade frequently.

Meanwhile, smartwatch vendors have only convinced a fraction of fitness tracker users that their support for apps and more advanced communications features justify their higher cost and weaker battery lives. And consumers in general haven't been sold on the idea of buying smartwatches to do things they're already doing with smartphones a little more quickly or conveniently.

Pebble's software and engineering talent could eventually help Fitbit launch smartwatches that put it in better position to compete with the likes of Apple and Garmin. And given the reported acquisition price, buying the company appears to be a low-risk move. All the same, it's not going to solve Fitbit's growth problems unless the company finds a way to create devices that appeal to a much broader base of consumers than its current lineup.

That's a problem Fitbit is far from alone among wearables makers in struggling to figure out.

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