Wearable health firm FitBit noted triple the revenue in its second quarter financial results, the first by the company since it went public in June. Raking in £250 million from expansions into Europe and Asia, FitBit now holds a strong percentage of the wearable market.
Profit margins per unit dropped as FitBit invested more into new technologies and high-end wearables. In the report, it said the margins would likely stay the same for the rest of 2015. Adjusted margins fell to 47 per cent from 52 per cent in the previous year.
FitBit sold 4.5 million wearable devices, around the same number as the Apple Watch according to analysts. In the second half of 2015, it expects to sell less devices, as it prepares for an early 2016 product line refresh.
Net income also noticed a small growth, from £9.49 million to $11.34 million this year.
Even with the strong results, FitBit stock dropped 15 per cent on news margins had dropped. Investors were also unhappy with the size of the growth, hoping for more than 4.5 million device sales.
Still, FitBit’s stock is 145 per cent up from its original IPO, making the latest drop in price a scruff on an otherwise excellent first two months. Investors seem to be interested in FitBit as the new hardware startup, something that is becoming more unique as we move into a software and services dominated tech landscape.
News that Jawbone is struggling only helps to bolster FitBit, who currently holds around 70 per cent of the wearable market in the United States. That number may have lowered since the Apple Watch launched, although FitBit is still confident it will find customers.
Mark Skilton, Professor of Practice at Warwick Business School has made the following statement: "The Fitbit story is a great example of a company that understands the mix of design form and function in a new category of business technology. If you look at the products branding 'flex, charge, surge' they are focused specifically on what the wearer wants in lifestyle from casual to sports. Notably the devices display information easily which is a critical difference to Apple Watch and other wearables. This, plus the fact that the functions of mobile phone sync are essentially the same for 40 to 80 per cent less cost, makes a compelling case.
"Wearables needs to be thought of as 'location-based services on your wrist' rather than the misconception of an add-on accessory or a digital version of your old watch. It is, in fact, a 'weigh scale', 'a to-do list', 'a shop assistant', 'a payment tool' and more that connects you to the location space you are living in or moving and travelling around it.
"With people on average spending 1 to 2 hours per day travelling to work and from 3 to 5 hours in daily activities in retail, leisure and social activities it’s not hard to see the 'value of the digital space' this brings.