Thursday, 6 August 2015

Fitbit wearable, profits bearable -- patents comparable?

"Fitbit Tops Estimates in First Post-IPO Report; Margins Narrow" is the headline of Peter Burrows' Bloomberg post today. He reports:
"Fitbit Inc. sales and profit topped analysts’ estimates in its first report following an initial public offering, a sign that the company’s fitness trackers are weathering competition in the increasingly crowded wearables market. Second-quarter revenue more than tripled to $400.4 million ... 
The company, which dominates the market for fitness bands that monitor health data such as activity and sleep patterns, said it sold 4.5 million devices in the quarter. ..".
But that's not all. The analysts didn't fare too well, their forecasts averaging out at $319 million, according to data compiled by Bloomberg. Fitbit's gross margin -- one of a number of clues as to profitability and a fairly conspicuous one -- slipped marginally to 47 percent, down from 51 percent in the corresponding quarter of 2014, nudging the share price down too.


Competition and patent data watchers will be looking at other information for their guidance as to Fitbit's prospects. Fitbit still holds 34 per cent of the wearable device market, down from 45 per cent last year, and there's no shortage of rivals for a space on the world's wrists: Xiaomi, based in China, has captured 25 per cent of the same market though its products sell for far less than Fitbit's. Other significant players such as Jawbone, Samsung and Garmin, have seen their share of product sales fall too.

As for the patent scenario, this Cipher Snapshot tells it all: in short,
• The wearables market is growing and Fitbit has one of the largest patent portfolios [patents help stop copying, can be licensed and, if need be, securitised].
• Fitbit’s territorial coverage is comparatively weak [countries not covered by patents, which are national in scope, are countries in which otherwise protected technology can be freely used by competitors].
• Fitbit’s late entry means that others may own foundational technology [this can be a problem, but older patents may have expired or lapsed, may be available to take a licence or cross-licence -- and may also not actually be infringed].
• There is an increasing amount of patent litigation, and Fitbit is now involved [this is significant too: is FitBit on the receiving end or suing others? Infringed patents can produce a healthy income source].
This is only a Snapshot. An analytical exercise like this can only give a partial picture since there are other factors at play: other significant IP factors include the strength of the Fitbit brand, the extent of its trade mark portfolio and the power of consumer loyalty, and possession of technical data and know-how that is held under conditions of trade secrecy.  But aren't these IP-driven criteria a better framework for the prediction of future performance and the second-guessing of future marketing policy than are fluctuations in stock prices or disparities between predicted and actual trading figures?

The last word goes to respected academic Mark Skilton (Professor of Practice, Warwick Business School):
"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% less cost, makes a compelling case. 
The potential value that personal data and usage information wearables tells you about that customer and the situation means potential “big bucks” for companies and users to better enable their lifestyle and experience. There are issues of opt-in and out privacy and performance issues but as with all new technologies these trade-offs are part of this journey and in the right circumstances becomes a major opportunity".
Both Fitbit and Cipher deal with the presentation of information in a helpful, user-friendly way. Whether Cipher is the Fitbit of the world of patent analytics is a matter for users to decide.  However, in each case their value is not in the information itself but in the use to which they are put.

2 comments:

  1. Fitbit watch-watcher6 August 2015 at 17:19

    Isn't Fitbit in danger of becoming a generic descriptor for all similar wearables? That would be something pressing on my mind if I was buying or selling stock.

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  2. Jawbone aren't taking Fitbit's patent infringement threats lying down. Good update today on TechCrunch http://tinyurl.com/najuq5o

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