This week Fitbit (FIT) announced a new partnership with DexCom (DXCM -2.67%), which makes devices for continuous glucose monitoring, to allow people with diabetes to easily view their glucose levels on Fitbit's upcoming Ionic smartwatch.
Fitbit's CEO James Park said in a press release: "With Ionic, we are focused on driving positive health outcomes and more health focused tools, and this collaboration is a wonderful example of how we plan to bring that vision to our users."
Image source: Fitbit.
The move is a smart one for Fitbit, which is continually focused on making its products the best they can be for the health of users. The problem, though, is that investors made the news out to be a little too big, and pushed Fitbit's share price up about 11% after the news. If the DexCom partnership were an exclusive deal between Fitbit and the glucose-monitor company, then that stock-price surge would have been warranted. But Fitbit investors need to realize that the Apple (AAPL -1.22%) Watch -- the Ionic's key competitor -- has had the same feature for more than a year.
Investors are looking for a win right now
What should have been simply good news for Fitbit turned into its investors getting overly optimistic about just one feature on the company's upcoming smartwatch. Of course, the stock-price surge speaks more to peculiarities of investors than it does to Fitbit's business. But I can't help but wonder why they're getting so excited about the partnership.
Perhaps it's because Fitbit investors have had a few bouts of bad news lately. Competition is heating up between Apple and Fitbit in the wearable tech space, and China-based Xiaomi just leapfrogged both companies to become the No. 1 wearable-tech maker in the world. Take a look:
|
Vendor |
Q2 2016 Shipments |
Q2 2017 Shipments |
Percentage Change |
|---|---|---|---|
|
Xiaomi |
3 million |
3.7 milion |
23.3% |
|
Fitbit |
5.7 million |
3.4 million |
(40.3%) |
|
Apple |
1.8 million |
2.8 million |
55.5% |
Data source: Strategy Analytics.
Fibit's monumental 40% drop in shipments in the second quarter is a clear indicator that the company needs a smash-hit device, and soon. The Ionic could help put the company back on track, and it appears that investors are banking a lot on it already.
An uncertain future
I can't help but think that Fitbit is still in some serious trouble right now. The company has done a great job building out its brand and selling good devices, and it is trying to keep pace with Apple and other competitors by entering new product categories. But the problem is that Fitbit is sandwiched between Xiaomi's low-end fitness trackers and Apple's high-end Watch.
You could make the argument that when the $299 Ionic hits store shelves next month, it'll put Fitbit squarely in the higher-end market as well. But with Apple about to launch a new version of its already-popular Watch on Sept. 12, it's doubtful that Fitbit's device will be able to hold its own against the No. 1 smartwatch. The Apple Watch has a vastly larger app ecosystem, and the first-generation device sells for a price similar to the Ionic. The DexCom data integration is good news for Fitbit's upcoming device, but it's not, by any standard, a game-changer.
