Jawbone's wearable devices have struggled to garner the attention of consumers over the past few years. According to wearable shipment data from research firm IDC, the company doesn't even crack the top five on the wearable tech vendors list. Meanwhile, rivals Apple, Fitbit (NYSE:FIT) and Xiaomi are running away with the market.
Its failure to keep up with its competitors has forced the company to keep seeking private investors' funds to stay afloat, a process that recently included a down round where Jawbone's valuation took a hit.
To make matters worse, a recent article in The Information said that one of the company's most prominent investors, BlackRock, is questioning whether a sale of Jawbone would even earn its equity investors back their money.
Needless to say, things aren't going well for the company. But some are now suggesting Jawbone's future may rely, not on mass-market wearables, but on clinical-grade wearable tech devices.
It's a long shot to be sure, but the company certainly doesn't have much to lose at this point.
A clinical savior
Sources told The Verge back in May that Jawbone was looking to release a clinical-grade wearable device sometime this year, though there was little information beyond that.
The difference between consumer-focused and medical-grade wearables is whether or not they have the approval of the Food and Drug Administration. For example, the Apple Watch can track a user's steps and heart rate, but it isn't an FDA-approved medical device. Nor are Fitbit's fitness trackers.
Jawbone's rumored device would have to surmount a lot of regulatory and approval hurdles, including collecting and analyzing health information far beyond the capability of most wearable devices on the market, and proving that its use can actually improve a person's health.
The device under discussion is widely expected to come from Jawbone's acquisition of Spectros last year. Spectros says on its website that it "makes advanced molecular sensing devices and software which shed light on health and disease related to heart performance and cancer."
Its technology has been used on patients already, with the results published in medical studies.
The opportunity for Jawbone in releasing a medical-grade wearable device from Spectros, but under its own brand, is two-fold. The first is that it would be one of the only consumer-facing wearable tech makers to have a coveted FDA approval for one of its devices.
That would be a significant competitive advantage, especially as more technology companies enter the wearable tech space and current players are looking for ways to diversify their products beyond step counters and heart-rate sensors.
Second, the medical-grade wearable tech market is expected to balloon over the next few years; Soren Research forecasts it to grow from $2 billion in 2014 to $41 billion by 2020.
That market is simply too big for Jawbone, or its competitors, to pass up, and the company is likely hoping to be one of the first ones to transition into the medical space.
Could this all work?
I think Jawbone's purchase of Spectros shows just how serious it is about moving in the medical-grade device direction. After the acquisition, Jawbone added Spectros' founder to its executive team, making him its Chief Medical Officer. It's pretty unlikely the company would set up that position if it was just dabbling in medical-grade tech.
But being serious about clinical devices may not be enough for Jawbone. The most recent news about the company is that some of its investors are concerned they may not get out of Jawbone what they've put into it. If that's true, then the company may not have the financial backing to make its wearable device a success.
It's possible Jawbone could release a medical-grade device soon that turns into a hit for the company, but at this point, it's a pretty big long shot. With its current wearable shipments falling far below those of its competition, and investors seemingly losing confidence, Jawbone may not be in the best position to pivot to a new market.
Chris Neiger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. The Motley Fool recommends Fitbit. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.