Fitbit to slash 110 jobs after disappointing Q4

Fitbit lineup
Fitbit plans to expand into smartwatches this year as it grows its wearables portfolio following the acquisitions of Pebble, Vector Watch and Coin. But just how much demand there is for wearables is still far from clear.

Fitbit said it will slash 110 jobs in a move that underscores a wearables market that continually fails to live up to expectations.

The company acknowledged the layoffs—which mark 6% of its workforce—as it announced preliminary fourth-quarter results, saying it expects quarterly revenue will be in the range of $572 million to $580 million, falling far short of its previous guidance of $725 million to $750 million. Shares of the company plummeted more than 12% this morning on the news.

“Fourth quarter results are expected to be below our prior guidance range; however, we are confident this performance is not reflective of the value of our brand, market-leading platform, and company’s long-term potential,” Fitbit CEO James Park said in the announcement. “To address this reduction in growth and what we believe is a temporary slowdown and transition period, we are taking clear steps to reduce operating costs. 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.”

Fitbit said it hopes to cut its operating expense run rate by roughly $200 million, bringing it down to $850 million by the end of 2017

Perhaps the most notable thing about Fitbit’s announcement is that the company is actually the No. 1 vendor in the global wearables market. Fitbit shipped 5.3 million units to lead the space with a 23% share in the third quarter of 2016, according to IDC, seeing 11% growth, followed in order by Xiaomi and Garmin. Apple claimed a mere 4.9% of the wearables market as Apple Watch shipments plummeted 71%, IDC estimated, although the company still owned 41% of the smartwatch market.

Fitbit said it plans to expand into smartwatches this year as it grows its wearables portfolio following the acquisitions of companies such as Pebble, Vector Watch and Coin. But just how much demand there is for wearables is still far from clear.

“Smart wearables have been down in recent quarters, but clearly not out,” IDC Research Manager Ramon Llamas said in prepared remarks last month. “As user tastes change, so will their needs. That's the opportunity for smart wearables with multifunctionality and third-party applications, both for consumers and business users. To get there, we need to see more intuitive user interfaces, seamless user experiences, standalone connectivity and applications that go beyond health and fitness and into personal and professional productivity."

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