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Why Fitbit’s Latest Quarter Was Not as Great as It Seemed

Dec 05, 2016

Fitbit is maintaining its market share in the wearables market, but only because higher-end smartwatches have tanked.

A cursory look at the third quarter wearables market report that International Data Corp released on Monday appeared to show Fitbit holdings its own, slightly increasing its market share overall to 23% from 21% a year earlier. The number of Fitbit shipped increased 11% to 5.3 million, IDC noted.

But the report combines different kinds of smart wearable devices, including both fitness trackers and more expensive smartwatches, a category for devices that can run third-party software, like the Apple Watch or Pebble Time. IDC has already reported that the smartwatch segment contracted by a brutal 52% in the third quarter.

If the smartwatch segment is removed, leaving just the shipments of fitness trackers and other simpler devices, Fitbit's results don't look as good. The market for wearables excluding smartwatches grew 22% in the third quarter, it appears, meaning that Fitbit's 11% growth lagged competitors and its market share just in its own segment likely shrunk.

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Still, Fitbit sought to portray the results in the best possible light. The company's stock has been struggling for the past year and slipped 36% just in the past month, after it delivered a disappointing forecast for fourth quarter sales.

Fitbit "remains the clear leader of the overall wearables category," the company said in a statement. "Fitbit was among the brands with the strongest (year-over-year) growth, up 11%, demonstrating positive reception for new devices introduced throughout 2016 and continued growth for the company."

Fitbit should remain the overall market leader in the "near term," IDC said in the report. And the company could find more growth by offering a true smartwatch of its own. Fitbit is in talks to acquire such technology from Pebble. "The potential to expand into the smartwatch category present an opportunity for the company to be more than just a fitness brand," IDC said.

The IDC report didn't do much for Fitbit's stock price, however, as investors are more concerned about the current fourth quarter's sales. Shares of Fitbit (fit) were unchanged at $8.14 in midday trading on Monday.

For more on Fitbit's expansion strategy, watch:

Chinese vendor Xiaomi's second-place share was about unchanged at 17%. Garmin (grmn), which sells both fitness trackers and smartwatches, slightly gained market share in the overall wearables market and ranked third. The company had a 6% share in the third quarter of 2016, up fro 5% a year earlier.

Apple (aapl) was the biggest loser in the report. Shipments of its Apple Watch dropped 71% to 1.1 million in the third quarter, according to IDC. Apple didn't start selling its upgraded Apple Watch Series Two until the very end of the quarter, however.

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