UPDATE: And the rumors have officially been confirmed. Fitbit has reported Q4 earnings lower than expectations and is trimming its global workforce by 6%, as part of a reorganization drive for their business.
This reduction in workforce affects 110 employees, but there still hasn’t been no information on divisions experiencing the damage. The company has only said that this development will help them in “creating a more focused and efficient operating model.” This is further being accompanied with a reduction in their expenses, while maintaining necessary investments and driving future growth of their position in the wearable market.
This development comes on the heels of a disappointing quarterly result, which saw Fitbit sell over 6.5 million devices. However, it still couldn’t meet revenue and net income figures for this quarter. Thus, falling below the guidance figures set forth by themselves. This slowdown in Fitbit’s business has been described as temporary and is expected to bounce back after the said transitional period.
Talking about the same, CEO James Park said,
Looking forward, we believe Fitbit is in a unique position to stimulate new areas of demand by leveraging the data we collect to deliver a more personalized experience while developing upgraded versions of existing products and launching additional products to expand into new categories.
Additionally, the company has also shed light on its intensions to capture the $10 billion smartwatch market. It will rival against the likes of Apple Watch and the massive number of Android Wear 2.0 devices. Talking about the same, Park further adds,
We believe the evolving wearables market continues to present growth opportunities for us that we will capitalize on by investing in our core product offerings, while expanding into the smartwatch category to diversify revenue and capture share of the over $10 billionglobal smartwatch market.
We believe we are uniquely positioned to succeed in delivering what consumers are looking for in a smartwatch: stylish, well-designed devices that combine the right general purpose functionality with a focus on health and fitness. With the recent acquisition of assets from Pebble, Vector Watch and Coin, we are taking action to position the company for long-term success.
PREVIOUSLY: The fitness band and health-tracking ecosystems have been booming considerably when compared to smartwatches. As per the recent IDC report, Fitbit continues to dominate the wearable market with a massive 23 percent market share. But, the company is struggling to keep its financials in check. Thus, the company’s fourth quarterly earnings report will not only see it disclose disappointing numbers but also lay off up to 10 percent of its staff as well.
This development was first reported by The Information, who is unaware of the teams being affected by this exercise. It will most likely lead to the departure of 80 to 160 employees across various departments. This move is also expected to save Fitbit some much-needed bucks, i.e to the tunes of over $200 million in costs. This can be seen as a restructuring effort to streamline operations for this major wearable player. It could also mean that the Fitbit is now diverting its focus away from being just a hardware player to a software one as well.
Further, the report suggests that the company recognized that the wearables market is expected to witness a slowdown in coming months. It decided to move past its current selection of fitness accessories and diversify the propositions for a soon-to-be stagnated market. The recent acquisition of Pebble and Vector Watch will, thus, enable Fitbit to stay competitive and develop smartwatches — a new product category for the company.
With the merger of said assets with its own technology stack, Fitbit is now probably looking to develop new e-paper smartwatches. These wearables will now integrate software and hardware assets that’ve been picked up from the aforementioned companies. Pebble has been one of the most widely recognized smartwatch players in the market, whereas Vector was a trendy new entrant. And now, we await the launch of the very first Fitbit smartwatch.
The report also sheds light on the rumors of Fitbit working on an independent app store that’ll provide third-party developers with another avenue to develop apps. The company will. thus, provide them with an API platform for developing their apps. These API could be sourced from the software assets acquired from Pebble late last year. This will, however, push Fitbit into a highly competitive market which hasn’t been able to gather attentions from buyers. The company will have to develop something different to stand out and sell out.