Fitbit has finally put to rest rumors that the company will be laying off employees due to poor revenue generation.
On Monday, Jan. 30, Fitbit reported its Q4 2016 earnings as expected, bringing in its folds the confirmation that it would be reducing 6 percent of its workforce. The company will be laying off 110 employees from its global workforce.
The fourth quarter expectations for the company were around $750 million, but it managed to generate revenue between $572 million and $582 million, which is way below the estimations.
"Fourth quarter results are expected to be below our prior guidance range," said James Park, CEO and cofounder of Fitbit.
While stating his disappointment, Park also mentioned that the missed objective does impact the brand negatively and is not an indication of any weakness of any sort from the company in the long run.
"We are confident this performance is not reflective of the value of our brand, market-leading platform, and company's long-term potential," added Park.
Despite the overall disappointment during the holiday period, most prominently on Black Friday, the company has seen a large scale growth in the Middle East, Europe, and Africa. The revenue percentage grew in these select markets at nearly 58 percent in Q4 2016.
Reason For Layoff And Future Plans
Fitbit states that to build a more "focused and efficient" business model, the reduction in workforce was necessary. This reorganization effort is expected to cost the company around $4 million in the first quarter of 2017 itself.
The company is looking to reduce the 2016 exit operating expenses run rate — approximately $200 million. Fitbit is optimistic that it can bring this figure to $850 million in 2017. This figure is inclusive of marketing spends, sales realignment, as well as enhanced optimization of investments for R&D.
In a bid to cement its position as a global leader in the wearable space, Fitbit is taking direct action to reduce the expenses of the company, which is evidenced by the move to reduce the workforce. However, it is looking to make necessary investments to steer its growth in the long term.
Park believes that the company, despite a disappointing fourth quarter, is positioned well to meet consumer demands for a stylish and well-designed smartwatch, which focuses on the user's health and fitness goals.
He also noted that with the recent acquisitions of Pebble — Coin and Vector Watch — Fitbit is looking forward to fuel and establish itself as a force to be reckoned with in the wearable space.
Photo: Kārlis Dambrāns | Flickr