Fitbit CEO James Park: ‘My outlook is never have a rough quarter’
Here’s the odd thing about Fitbit cofounder and CEO James Park: For a guy who built a company devoted to measuring heart rates, his barely budges—with his pulse, for the most part, hovering between 60 and 80 beats per minute even on the day of Fitbit’s IPO last month, when the stock shot up nearly 50%. Even when making his way to the NYSE bell podium (pulse: just under 80 bpm). Even when being interviewed in quick succession on opening day by the Wall Street Journal, the New York Times, and Fortune (pulse: dipping into the low 60s).
In case you’re wondering, this trove of personal data comes courtesy of Park himself, who shared with Fortune his minute-by-minute chronicle of heartbeats, sleeping schedule, and other biometric insights from his own Fitbit tracking devices as the company prepared for its June 18 IPO. (We’ll delve deeper into that in a later story in Fortune.)
But on Tuesday morning, in a conversation with Fortune Assistant Managing Editor Brian O’Keefe on the main stage at Fortune‘s Brainstorm Tech conference in Aspen, Park revealed a notable exception to his preternatural calm. At one point during the roadshow, Park found himself in a contentious meeting with a group of would-be investors. They were aggressively challenging Fitbit’s business model. Park said he told them flatly: “If you don’t like how we operate, you don’t have to invest.”
In retrospect, one thing is clear: If those investors did choose to pass, they sorely missed out.
The company is now valued at around $9 billion, up from $4.1 billion at the close of its June 18 debut. (Yes, less than a month ago.) Not a small premium for a company that earned $131.8 million in 2014 on sales of $745.4 million—and that suddenly finds itself competing with Apple.
That said, the company, which Park cofounded in 2007 with Eric Friedman, has established a formidable lead in what Fitbit grandly calls “the connected health and fitness market.” As of the end of March, it had sold more than 20.8 million devices and had racked up an 85% share (measured in dollars) of fitness activity tracker sales in the U.S., according to The NPD Group. That’s up from a 70% share overall for 2014.
Challenges abound, to be sure. As a public company, O’Keefe pointed out, Fitbit would face the tyranny of quarterly earnings. Park’s answer: “My outlook is never have a rough quarter.”
There is also the seemingly inevitable pattern that people fall in love with their fitness trackers for a few weeks and, just as quickly, abandon them. Park says his solution is to further integrate the devices into the lives of users by adding a host of peripheral, but often requested, features such as text messaging.
And then there is the matter of an embittered competitor, Jawbone. In the past couple of months, Park has found himself staring down a trio of lawsuits from its rival, which has accused Fitbit of “systematically plundering” its trade secrets and intellectual property by hiring Jawbone employees who, Jawbone alleges, took confidential and proprietary materials with them on the way out the door.
Park dismissed the lawsuits with a joke: “Jawbone should probably create a new app that tracks how many lawsuits they file,” he said—and pointed out that Fitbit is no slouch when it comes to generating intellectual property. Fitbit, said Park, owns some 200 patent and patent applications, of which Park is the author of 93.
“Innovation,” he added, “isn’t just reflected in the number of patents you have, but also your place in the market.” Park is continuing to push sales on all fronts—including in some 45,000 brick-and-mortar stores in 50 countries. “Physical retail is a still a big part of the business model,” he said, despite the sharp growth of e-commerce.
So what has been among the CEO’s best business decisions in Fitbit’s impressive rise?
“We bought the name [“Fitbit”] for about $2,000 from some guy in Russia. I said, ‘How much do you want?’ And he said, ‘$10,000.’ I said ‘How about $2,000?’ And that was that.”
Park reflected for a moment and then marveled at his good fortune: “Hmm. He probably could have gotten equity.”