Everyone I know seems to have a Fitbit (NYSE:FIT). But maybe that’s just a thing for old white folks.
Fitbit issued a terrible, horrible, no good, very bad quarterly report July 29, with miserable guidance. It lost $68.5 million, 27 cents per share, on revenue of $313.6 million and will lose money for the full year.
At a stop during a recent walk, the reason was clear. People like Fitbit trackers, but most won’t spend up for the smart watch. We also don’t take the tracker data seriously. It’s like a Tamagotchi for grandpas.
The trackers cost under $100, and the Versa Lite watch retails at $200. The Versa Lite tries to compete with the Apple (NASDAQ:AAPL) Watch, but lacks key features. Apple reported $5.5 billion in revenue from “wearables, home and accessories” during its most recent quarter. They seem to have it figured out.
A Fitbit Is Not a Medical Device
The problem is that the Fitbit is not a medical device. The company doesn’t have enough cash to make it one. If a wearable were classed as a medical device, doctors could prescribe them to patients and huge new market opportunities would open.
Doctors have resisted tracker data from patients, saying wearables lack accuracy. They don’t know how to interpret the data and worry about legal liability.
This is slowly starting to change.
Some doctors have used Fitbit devices to track patients after surgery. There are hints that “one more feature,” like blood pressure monitoring, could be a “tipping point” leading to widespread use. But that remains tantalizingly far off. Fitbit is also testing a pulse sensor but has yet to release it.
Apple has low-level FDA clearances for its irregular heart rhythm alert and E.C.G. A friend wrote recently that these features helped save his life. Continuous glucose monitors, worn on the skin, can also interface directly with smart phones.
The Food and Drug Administration has a software pilot program for wearables, and claims it is trying to develop a “speedy” review process. Apple is working with several start-ups whose apps and add-ons might connect to the Watch but the market breakthrough hasn’t happened yet.
No More Money
The company reported $335 million in cash in its June report, down from $474 million in December. During the first six months, it lost $147 million, meaning it could potentially run out of money in a year. That’s after cutting its research budget. The company has spent $148 million on research over the last six months, down from $176 million a year ago.
All this is reflected in the stock price, which has been cut in half since February, opening August 2 at $3.31. Analysts are saying “just sell,” calling this a winner take all market that Apple has won.
This doesn’t mean the game is over. Verily, which is one of the “other bets” of Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), has gotten Class II FDA approval for its EKG monitoring, and is looking at applications in areas like PTSD and Parkinson’s. It bought out the intellectual property of Fossil, another smartwatch maker, early this year. But Verily remains a good distance from the market, and Alphabet has the money to be patient.
The Bottom Line
I bought a Versa Lite during the most recent quarter. I like it. But I don’t take it seriously. I use it as a goad to get more exercise and better sleep. It’s not a medical device. I don’t talk about it with my doctor.
Until doctors take wearables seriously, the space won’t grow. And Fitbit lacks the cash, and the time, to get into that game.
Dana Blankenhorn is a financial and technology journalist. He is the author of a new environmental story, Bridget O’Flynn and the Bear , available now at the Amazon Kindle store. Write him at email@example.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in AMZN and AAPL.