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Fitbit Presentation PDF
1. ADDRESS 405 HOWARD STREET
SAN FRANCISCO, CA 94105
WEBSITE WWW.FITBIT.COM
SECTOR ACTIVITY TRACKER
INDUSTRY CONSUMER ELECTRONICS
2. TABLE OF CONTENTS
I. Introduction
Summary.………………………………………………………………………………………………………………………………………………………………………
… 3
Company History
II. External Analysis…………............................................................................................................................................................................................ 5
Industry Overview
Porter’s Five Forces
III. Internal Analysis…...................................................................................................................................................................................................... 8
Most Important Executives
Product Diversification
Patents
Other Resources and Competencies
IV. Financial Analysis..................................................................................................................................................................................................... 13
Rising Revenue
3 Year Projection
Operating Analysis
Stock Analysis
V. Recommendation...................................................................................................................................................................................................... 18
Selling Fitbit
Increasing Spending on R&D
Smart Watch & More Features
4. 4
INTRODUCTION SUMMARY: COMPANY HISTORY
Jul 2007:
Inspired by the advances in
sensors and wireless technology,
Eric Friedman and James Park
created Healthy Metrics
Research Inc.
“Where does Fitbit go from here?”
Sep 2009:
Fitbit launched its first
product, the Fitbit for $99.
Oct 2011:
Launched its first iPhone
app, Fitbit Ultra. The app
measures vertical steps with
a built-in altimeter.
Jun 2012:
Fitbit went international and
released new products such as
Aria Scale, Fitbit One, and Fitbit
Zip.
May 2015:
Fitbit’s IPO valued at $4.3
billion.
29 million
devices sold
34% of market share 45,000 retail stores 50 countries
15 million
registered users
SOURCES: DMR STATS, WIKIPEDIA, MOBILE HEALTH NEWS
6. EXTERNAL ANALYSIS: INDUSTRY OVERVIEW
SOURCES: WALL STREET JOURNAL, MORNINGSTAR, THE FEDERAL RESERVE BANK, SEC, MORNINGSTAR
18.8%
13.5%
39.6%
12.9%
15.3%
0% 10% 20% 30% 40% 50%
0- 14 Years
15- 24 Years
25- 54 Years
55- 64 Years
65 and Over
2015 POPULATION AGES DISTRIBUTION (U.S.)
CURRENT STATE
• Activity tracker is a sub-set of the Industry Consumer Electronics.
• Activity tracking is a relatively young innovation, emerging in the late
1980s and comping to prominence in the late 1990s and mid 2000s.
• Substitution has become a greater challenge to industry participants
than competition.
• Industry is reaching a mature stage, in which the growth has slowed
down and not everybody is guaranteed success.
• The current owners of wearable devices are young, with nearly half
(48%) between 18-34 years old.
6
Activity Tracker
Wearable Stationary
ACTIVITY TRACKER INDUSTRY SUMMARY CHART
MAJOR ACTIVITY TRACKING PLAYERS
• American. Launched in 1989.
• Operates internationally.
• Offers wide range of consumer electronics.
• Launched in California during 1999.
• Solely domestic operations.
• Early member of activity tracking industry
• Launched in 1984. Largely American operations.
• Acquired smaller activity tracker companies,
including Misfit.
7. 7
EXTERNAL ANALYSIS: PORTER FIVE FORCES
INTENSITY OF RIVALRY
(HIGH)
THREATS OF NEW ENTRY
(MEDIUM)
THREAT OF SUBSTITUTION
(HIGH)
• Industry growth has seen reductions in
growth, with some predicting a decline .
• The number of competitors is slowly
decreasing, intensifying rivalry.
• Differentiation also continues to reduce in
some facets, and prices have become
accordingly competitive.
• The activity tracker industry competes
against smartwatches, smartphones, and the
more traditional pedometer.
• Switching costs are low or nonexistent.
• Smartphones and smartwatches continue to
become more popular and offer increasingly
identical functions as activity trackers, in
addition to the wide variety of functions
already performed by these devices.
• Barriers to entry are prevalent in this industry
• In order to manufacture goods, significant
capital is needed, both monetary and human;
access to distribution channels is a necessity
.
• Product differentiation is relatively important,
and customer loyalty does exist for several
members of the activity tracker industry.
• Government policy can limit claims of product
attributes.
SOURCES: WALL STREET JOURNAL, BARRONS
BUYERS POWER (HIGH)
• Switching costs are low or non existent.
• Customers have shown willingness, and even preference, for purchasing
substitutes.
• Industry sales are heavily reliant upon retail sales, increasing the power
of individual consumers.
SUPPLIER POWER (MEDIUM)
• Suppliers’ goods are critical to necessary manufacturing components,
but raw materials are widely available and occasionally substitutable.
• Component quality is generally less valued than device function, though
it is still important to consumers.
9. 9
INTERNAL ANALYSIS: MOST IMPORTANT EXECUTIVES
JAMES PARK
(CEO)
ERIC FRIEDMAN
(CTO)
WILLIAM ZERELLA
(CFO)
EDWARD SCAL
(CRO)
ANDY MISSAN
• CEO and Co-Founder.
• Earlier in his career he worked for CNET and Morgan Stanley.
• Attended Harvard for Computer Science but dropped out.
• CTO and Co-founder.
• Previously worked at CNET and Epsei Technologies.
• Graduated from Yale with a degree in Computer Science.
• CFO of Fitbit since 2014.
• Worked as CFO of other publicly traded companies such as Vocera Communications.
• Graduated from New York University.
• Has served as Chief Revenue Officer since 2010.
• Before Fitbit, he worked at Avanti Growth Partners, a private equity and consulting firm.
• Graduated from the Stanford Business School.
• VP of General Counsel since 2013.
• Served as VP for other Tech Firms as well as Senior Legal Counsel at Sony.
• Graduated from Northwestern University School of Law.
SOURCES: THE MOTLEY FOOL
10. 10
INTERNAL ANALYSIS: PRODUCT DIVERSIFICATION
Zip One Flex 2 Alta Charge 2 Blaze Surge
$49.99 $79.99 $79.99 $129.99 $129.99 $159.99 $199.99
Steps, Calories
Clock
Sleep Tracking
Alarm
Active Minutes
Multi Sport
Continuous Heart Rate
Text/ Call Notification
Music Control
GPS Tracking
Swim-proof
SOURCES: FITBIT
11. 11
INTERNAL ANALYSIS: PATENTS
SOURCES: GOOGLE PATENTS
DESCRIPTION PICTURE
• Provides a wearable fitness monitoring device which
includes a photoplethysmograhphic sensor.
• Allows the device to measure one or more characteristics of
a heartbeat waveform.
• Combines two types of data collection to increase accuracy
of GPS travel distance and location.
• Takes into account steps and length of strides of individual
as well as GPS coordinates.
• Provides more accurate step count for user.
• Reduces GPS power for increased battery life.
PATENT
Wearable Heart
Rate Monitor
GPS Accuracy
Refinement
& GPS Battery
Usage
Reduction
Sedentary
Period Detection
• Provides an advanced method of determining sedentary
state of the user(inactivity).
• Measures Metabolic Equivalent of Task (MET).
• If MET exceeds a determined threshold value, the user is
deemed sedentary.
12. 12
INTERNAL ANALYSIS: OTHER RESOURCES AND COMPETENCIES
SOURCES: SMART COMPANY
DESCRIPTION COMPETENCIES
• Provides an international recognition
• Is known for reliable products
• An edge on their competition
• Direct to consumers from online website
• Diverse retailers such as Costco, BestBuy and Wal Mart
• Sells directly to companies with corporate wellness
programs.
• Costly to imitate
• Rare
• Valuable
RESOURCES
Brand
Recognition
Business Model
• Not a Competency
• Other Companies use same model
• Has led to Strong Year over Year positive revenue growth
First Mover
Advantage
• First to Introduce Wearable Fitness Devices
• Captures loyalty customers from the beginning
• Possesses Patented Technology
• Has a strong loyal consumers base
• Can set the trend within the industry
21. 21
RECOMMENDATION: INCREASE SPENDING ON R&D AND S&M
SOURCES: FITBIT
RESEARCH & DEVELOPMENT
R&D SPENDING S&M SPENDING
$37.0
$70.7
$0
$20
$40
$60
$80
Jan-15 Jan-16
91% Increase
SALES & MARKETING
$62.7
$76.8
$0
$20
$40
$60
$80
$100
Jan-15 Jan-16
23% Increase
• There is a strong positive correlation between sales and marketing
expense and sales revenue at Fitbit
• Fitbit planned on expanding its oversea business through increase
S&M spending. Launching media campaigns around the world is
expected to driver higher sales and marketing expense.
• The 4th Quarter S&M expense is going to rise preparing for the
Christmas Holiday Season.
• In the long term, Fitbit hope to set the marketing expense to be at 15%
of revenues on average.
• Driven by innovations, Fitbit has continuously reaped its benefits
through the rising sales.
• One third of Fitbit sales figures come from one third of repeat
customers. This illustrates the importance of upgrading the devices.
• It is essential for Fitbit to keep investing to outpace the growth of large
competitors such as Apple with market cap of $578B or Garmin with
market cap of $9.7B.
• R&D should be spent toward not only hardware improvements but
also software.
22. 22
RECOMMENDATION: SMART WATCH & MORE FEATURES
0%
5%
10%
15%
20%
25%
30%
$100 or
Less
$101 to
$200
$201 to
$300
$301 to
400
$401 to
500
$501 to
600
Over $600
SOURCES: MORGAN STANLEY
PRICING STRATEGY
Apple Watch starts
at $349
ONGOING ACQUISITION
• Target price from $34-$40
million.
• Pebble has sold over 400,000
watches with over $60M
revenue since Jan 2013.
• A great mesh with Fitbit for
revenue, cost synergies and
the patents.
39.0%
38.0%
32.0%
31.0%
28.5%
28.0%
0% 10% 20% 30% 40% 50%
More Sensors
More Comfortable
Greater Computing Power
More Accurate Reliable Data
Improve Design
More Discrete
FEATURES THAT WOULD INCREASE USAGE
