The CEO of Fitbit Inc (NYSE:FIT) recently went on record to assure those waiting for the new Fitbit smartwatch that it will include third-party app support at launch. With FIT stock down almost 29% for 2017 — extending near 90% declines since this time in 2017 — that product launch is gaining in urgency.
James Park is trying to quell rumors that the wearable maker is struggling with its first smartwatch. However, with slumping Fitbit sales and a smartwatch market that’s failing to catch fire, while remaining dominated by Apple Inc. (NASDAQ:AAPL), a question remains:
Will that Fitbit smartwatch be too little, too late?
Fitbit’s Struggle to Launch a Smartwatch
We’ve known that FIT is working on a smartwatch for some time. When the company bought the assets from smartwatch pioneer Pebble last December, the cat was out of the bag. Yahoo Finance leaked images and details about the Fitbit smartwatch in May. That news resulted in a temporary bump for FIT stock. But the leak also contained claims that Fitbit was struggling with manufacturing issues and perhaps worse, that a Pebble-like app store would not be available at launch.
Then a day after the Fitbit smartwatch leak, tech management consultancy Strategy Analytics released its Q1 numbers for wearables sales, indicating that the Apple Watch had overtaken Fitbit sales to dethrone FIT as the world’s top-selling wearables maker.
Fitbit disputed Strategy Analytics’ numbers, but that report — combined with the Yahoo leak — quickly took the wind out of FIT stock and it’s been downhill again since then.
For what it’s worth, IDC released its version of Q1 global wearables sales in June. It used sales numbers supplied by Fitbit (something Strategy Analytics had not done), but still put FIT in third place, with Apple and Xiaomi tied for top spot. While Apple Watch sales are always an estimate (part of FIT’s dispute over the Strategy Analytics numbers), IDC had Apple at 3.6 million units sold, a 64.1% gain year-over-year, compared to FIT’s 3 million, a 37.7% decline.
So, even if the actual numbers are off slightly, the trend seems pretty clear.
Third-Party Apps?
CEO Park spoke to The Verge last week, to publicly dispel rumors that the Fitbit smartwatch would not support third-party apps at launch. He told the publication the smartwatch will have an app platform, and an app gallery — third-party apps available through Fitbit’s mobile app.
Leveraging Pebble’s software, FIT will be releasing a software development kit that “will make it easy for developers to build apps, ones that will be compatible with both iOS and Android devices.”
Initially, third-party apps will be limited to specific Fitbit launch partners, but soon afterward the SDK will be available to all developers.
Too Late to Turn Around FIT Stock?
There has been little market reaction to Park’s reassurances. A big reason behind the collective yawn is that consumers have failed to adopt smartwatches en masse. What sales there are have been are snapped up by Apple.
Many of the biggest supporters of Alphabet Inc.’s (NASDAQ:GOOGL, NASDAQ:GOOG) Google and its Android Wear smartwatch platform have simply stopped releasing new models in the face of consumer disinterest. Some took substantial loses as a result of their smartwatch ambitions. Making matters worse, it’s possible that an Apple Watch 3 could be coming as soon as this fall.
That puts FIT in a tough position. Xiaomi is busily turning basic fitness wearables into commodity devices. And the Apple Watch is proving impossible to beat as the smartwatch leader — with Apple piling on health and fitness features in an effort to tempt consumers into buying a smartwatch by trying to steal Fitbit sales.
When the Fitbit smartwatch finally launches, it may be too late for the device to provide the hoped-for FIT stock turnaround. It has to convince consumers they actually want a smartwatch, and then it has to convince them its a better choice than the Apple Watch…
However, even as Fitbit struggles, it can’t be counted out. When IDC reported that the company had lost the wearables crown and fallen to third place, it added this statement that gives hope a turnaround remains possible:
“By no means should Fitbit be removed from the wearables conversation. With a user base of 50 million, a strong presence within corporate wellness, and assets that keep it top of mind for digital health, Fitbit is well positioned to move into new segments and markets.”
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
