Nike is said to have thrown in the towel on its FuelBand fitness bracelet hardware project, according to a CNET report.

Update: Nike response added below.

A spokesman told CNET that a “small number of layoffs” had taken place on its Digital Sports team to align with its business priorities. Moving forward, it appears that Nike will focus on fitness software efforts instead of custom hardware.

Curiously, Nike just opened a Nike+ Fuel Lab in San Francisco last week that listed the FuelBand as part of its mandate. Nike released a new version of the FuelBand last fall, but changes to the first-generation version were largely incremental.

While fitness band sales saw a substantial surge last year, the device category has yet to find a stable place in the market. Wearables also face competition from smartphones like the iPhone 5s and the Galaxy S5, which now include additional fitness sensors that replicate some of the functionality of dedicated wristbands and pendants.

As Nike bows out of the hardware space, reports have picked up that Apple is preparing its own wearable device with a strong focus on fitness and health. The two comapnies have worked together closely on mobile projects in the past, and, as Daring Fireball notes, Apple CEO Tim Cook sits on Nike’s board of directors.

Update: A Nike spokesperson provided the following statement to TNW:

The Nike+ FuelBand SE remains an important part of our business. We will continue to improve the Nike+ FuelBand App, launch new METALUXE colors, and we will sell and support the Nike+ FuelBand SE for the foreseeable future.

Nike is committed to Nike+, to NikeFuel and to driving innovations that bring richer experiences for all athletes.  We will continue to leverage partnerships to expand our ecosystem of digital products and services, using NikeFuel as the universal currency for measuring, motivating and improving.

This can be seen through the Nike+ Fuel Lab which allows us to work with partners in the Bay Area to bring 100 million new members to Nike+ and the NikeFuel platform and deliver even more value to this fast-growing membership.

Partnering with industry-leading tech companies is nothing new for Nike. We have been working with Apple to develop products since 2006, when we introduced Nike+ Running, and Nike has since created iOS Apps including Nike+ Training Club, Nike+ FuelBand and Nike+ Move.

Building on these successful products and services, Nike and Apple continue to partner on emerging technologies to create better solutions for all athletes.

Exclusive: Nike fires majority of FuelBand team, will stop making wearable hardware [CNET]