Nike is reportedly exiting the wearable hardware market, with the closure of its Digital Sport team responsible for the FuelBand fitness tracker and Nike+ GPS watch.

“As a fast-paced, global business we continually align resources with business priorities,” Nike spokesman Brian Strong told CNET. “As our Digital Sport priorities evolve, we expect to make changes within the team, and there will be a small number of layoffs.”

The fitness market is becoming increasingly crowded, with similar product from pure-play companies like Fitbit and Jawbone as well as the numerous tech brands which have recently entered the space, but the news comes as a surprise nevertheless.

The FuelBand was widely considered a success, often pointed to as an exemplar of innovative brand marketing. Nike was planning to release a new FuelBand model later this year, which has now been cancelled, and opened a Nike+ Fuel Lab testing space in San Francisco just last week.

The current-gen model, the FuelBand SE, will still be available to buy, with a range of new colours launching shortly. But overall, the move represents a refocus by Nike, away from hardware and towards software.

Nike confirmed it will be continuing to work on the accompanying Nike+ app, and is releasing an API to the public this autumn. The NikeFuel system – intended to be a unit of measurement thats universal across all types of exercise – has been criticised for being inaccurate and difficult for users to understand, but it seems this is the aspect that Nike wants to push going forward.

The newly-opened Fuel Lab will see it working together with other companies in the mobile fitness space, including MyFitnessPal, RunKeeper and Strava, to incorporate Fuel points into their apps.

It seems likely that, if Apple finally unveils its long-rumoured iWatch device this year, Nike will play some part on the software front. The two companies have a long history of partnering, and Apple CEO Tim Cook has been on on Nikes board for the past nine years.