Watchmaker Fossil Group’s shares spiked today on news it had sold some of its smartwatch technology to Google in a deal worth $40 million.

Announced today and expected to close in January, the deal launched Fossil’s share price as high as 10%. By close, though, it had ebbed back to $18.00 for a single-day gain of 3.33%.

Fossil is selling intellectual property (IP) “related to a smartwatch technology” and will transfer some of the related project team to Google.

With a research and development team over 200 strong even after the transfer, the technology is likely a small part of Fossil’s smartwatch plans. The technology is Fossil Group’s fastest-growing market, and it now has smartwatches across 14 brands.

Greg McKelvey, the firm’s executive vice president, says of the product line:

Fossil Group has experienced significant success in its wearables business by focusing on product design and development.

McKelvey refers to Google as Fossil’s “innovation partner” with whom it will “continue to unlock growth” in wearable technology.

Finally, a Google Smartwatch?

Rumors have circulated about a Google Smartwatch for some time. Google confirmed it wouldn’t happen in 2018. This, despite expectations that it would release a watch to showcase its rebranded “Wear OS,” the slimmed-down operating system for wearable devices.

Google was apparently working on a Google Pixel Watch, but its last hardware launch event came and went without a sign of a watch.

The purchase of IP from Fossil and the transfer of research team almost certainly means that something is in the pipeline. Whether that will appear in 2019 remains to be seen.

Google parent Alphabet’s stock ended the day with a 0.88% gain, slightly outpacing the Nasdaq’s 0.71% rally.

Smartwatch Market Will Reach a Value of $32 Billion by 2020

Apple currently dominates the wearable sector, with Fitbit and Samsung also competing with Fossil in the market. Fossil’s accessory experience has helped it carve out a niche in smart wearables.

The smartwatch market, valued at just over $10 billion in 2017, is expected to reach a value of around $32 billion by 2020. 40% of 2017’s sales went to Apple. Huawei is expected to overtake Apple’s smartphone market share this year. The Chinese phone-maker is producing lower-priced smartwatches to meet demand in countries like India.

Apple could also see growing competition in the wearable space if Google can quickly leverage its new deal with Fossil. Apple’s FAANG counterparts appear to be leaving the Mac and iPhone maker in the dust already in 2019.

Featured Image from Shutterstock. Price Charts from TradingView.