Tech

The revolution will not be “wearable”

Fitbit shares plummet amid worries about the next hot tech market

Fitbit’s shares plummet. Is the “wearable” revolution over?

Shares in Fitbit, the U.S. company leading the wearables market, opened 30 percent down Thursday after the company forecast its holiday sales wouldn’t be as high as expected.

Fitbit stock opened at $9.03 on the New York Stock Exchange, down from a $12.81 Wednesday close. The stock has been in free fall since July last year, when it was trading at over $47 per share.

The share-price plunge came despite Fitbit reporting revenue growth of 23 percent for the quarter, but CEO James Park succinctly outlined the problem to investors: “We continue to grow and are profitable, however not at the pace previously expected.”

Ahead of the results announcement, CNBC reported that interest from investors shorting Fitbit’s stock was at an all-time high, though some analysts suggested the stock may have bottomed out. The 30 percent drop on Thursday suggests that’s not the case.

Fitbit is the flag bearer for wearables, commanding as much as 25 percent of the market, according to IDC, but its position is being undermined by cut-price devices from China. Xiaomi, the Chinese startup that also sells smartphones, is the world’s second-biggest wearables manufacturer, with 20 percent of the market.

While Fitbit’s top-of-the-line product, the Fitbit Surge, sells for $250, Xiaomi’s newest fitness tracker, the Mi Band 2, costs just $23 and offers most of the features found on Fitbit’s higher-end devices.

Jawbone, an early leader in the fitness tracking market, had similar struggles and has effectively exited the market. The number of wearable devices being shipped will continue to grow, up from 110 million devices this year to 200 million by 2019 according to IDC, but with prices being slashed and competition increasing, it will be become harder for any company to make significant money in the wearable market.

While it took the smartphone market a decade to see this type of commoditization and price drops, the wearables market, which is only five years old, seems to have already reached its saturation point.

Besides fitness trackers, another part of the wearables industry, smartwatches, are also struggling to find traction. In the third quarter of this year, sales of smartwatches declined by over 50 percent compared to the same period in 2015, according to IDC.

While there were mitigating reasons for the decline — the delay of Google rolling out Android Wear 2.0 and a later launch of the new Apple Watch — it’s still not a positive sign in a market so young.

Cover: Andrej Sokolow/picture-alliance/dpa/AP Images

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