Fitbit’s seriously feeling the crunch as it cuts jobs and lowers guidance
Fitbit shares have dived as much as 13 per cent after revealing it will cut six per cent of its global workforce and double down on other cost saving measures while revenues will fall short of guidance to the tune of around $150m.
The wearables maker expects revenues of "$572m to $580m, compared to the company’s previously announced guidance range of $725m to $750m" for the fourth quarter of 2016 it said in an update to the market on Monday.
That will reduce growth for the full-year in 2016 to 17 per cent, compared to the forcasted 25-26 per cent.
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“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," said co-founder and chief executive James Park.
"While we have experienced softer-than-expected holiday demand for trackers in our most mature markets, especially during Black Friday, we have continued to grow rapidly in select markets like EMEA, where revenue grew 58% during the fourth quarter."
It will now try to reduce operating costs "to address this reduction in growth and what we believe is a temporary slowdown and transition period".
That means 110 jobs will go at a cost of $4m which will be recorded in the first quarter of 2017.
It will also take a look at marketing and sales spend and "optimise" its R&D investments, while Park and Fitbit's technology chief Eric Friedman will essentially not take a salary, reducing it to a nominal $1.
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“We believe we are uniquely positioned to succeed in delivering what consumers are looking for in a smartwatch: stylish, well-designed devices that combine the right general purpose functionality with a focus on health and fitness. With the recent acquisition of assets from Pebble, Vector Watch and Coin, we are taking action to position the company for long-term success," said Park.
It also expects the first half of 2017 to be a tough one.
It will not have the new products on the shelves it had at the same time last year and which made up half of all revenue for that period, while it has a higher "operating expense run rate" – or, blowing through more cash.
However, it expects things to stabilise in the second half of the year.
Its guidance for 2017 is $1.5bn- $1.7bn revenue and a net loss of $0.22-$0.44 per share.