What happened
Shares of fitness wearables company Fitbit (FIT +0.00%) surged on Thursday following the announcement of a partnership with medical-device maker DexCom (DXCM 1.38%) related to glucose monitoring. The two companies will develop a continuous glucose monitoring experience that will put DexCom data on Fitbit's upcoming Ionic smartwatch. Fitbit stock was up about 10% at 11:45 a.m. EDT, while shares of DexCom were down 1.7%.
So what
With Fitbit suffering from a steep drop-off in demand for its fitness trackers, the Ionic smartwatch needs to be a success for the company to turn itself around. Ionic is set to begin shipping in October for $300, slightly less expensive than the base Series 2 Apple Watch, but slightly more expensive than the first-generation Series 1.
Image source: Fitbit.
DexCom's continuous glucose monitoring (CGM) products currently allow users to view data on Android and iOS devices. The Fitbit deal will put that data on the Ionic smartwatch, allowing users to quickly view important health information. "The strength of our brand and our ability to track critical health metrics continuously for up to 4+ days, coupled with Dexcom's market leadership in CGM, present a powerful combination that we hope will help millions of people better manage their diabetes," said Fitbit CEO James Park.
DexCom data is expected to be available on the Ionic sometime in 2018. Further collaboration between the two companies is possible, although nothing concrete has been announced.
Now what
The 10% move in Fitbit stock seems like a major overreaction. This deal puts data already available on smartphones on Fitbit's Ionic. DexCom's mobile app is already integrated with the Apple Watch and Android Wear devices, meaning that this partnership is nothing more than Fitbit playing catch-up, trying to make its smartwatch platform a viable alternative.
Whether Fitbit's Ionic succeeds will depend on the willingness of consumers to buy a smartwatch with a nascent app ecosystem. The deal with DexCom doesn't change the story.
