Jim Cramer Was Right: Under Armour Is a Tech Company After All

Under Armour recently announced that it was acquiring MapMyFitness, an open fitness-tracking platform, for $150 million. Early indications seems to be that Under Armour wants to compete with Nike in the fitness/technology space.

While this is almost certainly true, it does not necessarily mean what most analysts and investors think it means.

Jim Cramer was right
Jim Cramer, host of CNBC's Mad Money, has long said that Under Armour is a technology company. As bombastic as that may sound at first, it seems in hindsight that Cramer was more right in his assessment than he probably even knew himself.

Under Armour is obviously still first and foremost a developer of industry-leading athletic apparel, footwear, and accessories. The company is not going to start making smart phones or tablets anytime soon. However, in labeling Under Armour a tech company, Cramer was referring to the company's ability to use innovation to advance its brand positioning and increase profits. In this way, Under Armour is very similar to a traditional technology company like Apple, which has created revolutionary products capable of garnering extreme customer loyalty.

The acquisition of MapMyFitness is beginning to make Cramer's statement look even better in retrospect. The most immediate takeaway from the acquisition news is that management at Under Armour wants a platform of its own that can challenge Nike's successful Nike+ product line, which includes various devices like Fuelband and Sportwatch that sync with Apple iOS devices and allow athletes to measure various workout metrics and share them with friends.

Bloomberg recently reported that Nike controls approximately 15% of the fitness/technology performance-tracking market. MapMyFitness was estimated to control about 5% of the market. The acquisition therefore gives Under Armour an immediate and significant foothold in this rapidly evolving segment. In what is likely the next step toward increasing athletic performance, the acquisition of MapMyFitness makes sense for Under Armour as the company can now be a serious competitor to Nike in the world of social fitness/technology.

What if there is more to this story than just nifty gadgets and social sharing, though?

The driving force
Investors who have followed Under Armour for any length of time know that one of the company's main drivers of growth is innovation. Whether management is rethinking the way synthetic fabrics absorb perspiration or the way cotton shirts block UV rays, the goal is always the same: to innovate the industry and make athletes perform better. This is why it should come as no surprise that Under Armour's latest acquisition of MapMyFitness is being fueled by the same innovative way of thinking.

One thing stands out to me in particular, though: Under Armour's "I Will Innovation" commercial from early 2013. At the end of the commercial, a female runner stops and tinkers with a futuristic-looking device on her synthetic apparel shirt. A voiceover narrates, "The next great athletic innovation isn't available just yet, but it's being built at Under Armour right now."

This begs the question: just what is Under Armour up to with its apparel line, and could MapMyFitness have something to do with it?

Based on Under Armour's impressive track record of innovative ideas, I don't think that it is out of the question to say that the company could be set to revolutionize the athletic apparel industry yet again. Is a shirt like the one in the aforementioned commercial, with built-in GPS and body-tracking capability, possible in the near future?

The answer is a resounding yes. We have already seen early shades of it from the company with its Armour39 shirt, which made its public debut at the NFL Scouting Combine last year. The device contains a nylon chest strap that includes a heart rate monitor, which in turn feeds an athlete's health vitals into a custom app interface.

A product line such as this eventually being made available to the public only makes sense. It is, after all, the same way that Under Armour's once niche synthetic shirts started. Initially used primarily by professional athletes like football players under their uniforms, Under Armour's signature apparel line soon went mainstream. In much the same way, if the technology of the Armour39 and MapMyFitness can be packaged into practical form, Under Armour might have the crown jewel of the next generation of athletic apparel.

The future
One thing is for certain: in the athletic apparel segment and even in the retail space in general, consumers and investors alike would be hard pressed to find a more forward-looking company than Under Armour. The constant innovation, which originates from founder and CEO Kevin Plank, has been and will continue to be a driving force behind the company's aggressive growth.

While there is much more to the growth story of Under Armour including expansive international opportunities and potentially large market share gains in valuable segments like footwear and female apparel, no other aspect demonstrates the company's innovative prowess better than its signature apparel product line. Already the leader in the space, Under Armour now has the capability to turn the industry on its head once again. Early indications suggest that management is well on its way to doing just that.

For these reasons and more, Under Armour will continue to be my largest holding.

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The article Jim Cramer Was Right: Under Armour Is a Tech Company After All originally appeared on Fool.com.

Philip Saglimbeni owns shares of Under Armour. The Motley Fool recommends Nike and Under Armour. The Motley Fool owns shares of Nike and Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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