Name: Despite Healthy Sales, Fitbit's Stock Is Tumbling. What Gives?
Uploaded: 2016-06-30
Duration: 4 min 51 s
Description: CEO James Park explains.

[ SOUND ] It's kind of hard to believe that Fitbit, the company behind the pioneering fitness tracker, has been around for more than nine years. It's still considered the leader in the wearables market, but it's attracted plenty of competitors along the way. I'm pleased to welcome CEO James Park to our studio for a round of Fortune's Fast Five. James, thank you so much for being here. Thanks, Andrew, for having me. Of course. All right, so we're gonna rip right into the questions. Question number one, Fitbit products are best sellers we both know that, but the company's stock is underwhelming. It's something like a third of what it was at IPO. Why is there such a disconnect? There's only so much we can do about controlling the stock price. So I think one of the things I tell our team and our employees is To be really focused on the company's financial performance and product quality, product features, etcetera. Because those are the things that we can actually control. But to be honest I think there's a lot of skepticism about the fact that we could be a one product company, a one hit wonder. I've heard that a lot. I think there's a lot of questions about our durability as a company, increased competition. But, as you said and as you mentioned, we've been around for over nine years. We've been the pioneers in this category. We've grown revenue tremendously. I'm very excited about all the products that we have in our pipeline, and I'm truly motivated by the mission the company Which is to get everyone in the world healthy or more active and that's what drives me and the employees everyday. So I'm very optimistic about our future. Fair point, all right. So the second question, it makes total sense to follow with this, there are a lot of numbers to think about when you run a company, right? You've got revenue, you've got profit, you've got your stock price. Right. What's the number or numbers that you look at To, you know, determine success for Fitbit. You mentioned the financials, but are there certain ones? In terms of financial metrics there's definitely a few. There's revenue, gross margin, and EPS that we focus on. And I think those are the numbers that investors care about. But internally there's other things. You know, I really want our employees to consider Fitbit The best place that they've ever worked at. So there's a lot of internal things that we look at from employee satisfaction and attrition that we want to be very cognizant. All right number three your Q1 results showed big increases in R & D really impressive stuff. What are you gonna use all that Money on? I know you can't tell us your next product, but So this category is so new that while we already have a leadership position, we're spending a lot and frontloading a lot of our [ UNKNOWN ] expense this year to really extend our lead and all that money, it's gonna be spent on several things. One is investment in more sensors I think there's more data types that we can collect on from people's health, that would be relevant to improving outcomes for many many people. The second is a lot of investment in software, because we can collect all the data in the world but if we can't mix censored after people then it's only useless. So there's a lot of the investment in the user's experience. And the analytics to make sense of that data for people. For sure. Fair enough. Number four, last year you partnered with Target. Very cool partnership to supply its employees with fitness trackers. So how important are corporate accounts moving forward for FitBit's business strategy, excuse me. So we've consolidated all our B2B efforts including corporate wellness, which is our business to employees, under one umbrella which we call group health. And so that area of the business is really important to us because we feel that places, like employers, are an excellent way in one shot to impact hundreds, thousand, tens of thousands, hundreds of thousands of people at once and the Target deal is a great example of that. Target made available FitBit trackers to 300, 000 of their U. S. employees. And look group health is really important for corporations because healthcare costs are one of the rising costs for CFOs within companies. So this is a really growing part of our business. Fascinating and last question. What or who is Fitbit's greatest threat? One it's ourselves, I mean we have to execute on the goals that we set for ourselves, and which are pretty ambitious, so there's a lot of work and planning that goes into that, and I feel we've executed pretty well over nine years. But if I had to pick an outside company, I think investors would consider Apple to be a competitor today. Although the brand promise and the products that we both have in this category really are different and address different segments of the market and I think a lot of the market share numbers bear that out where both of us have been able to succeed in this category and I think that's a testament to the fact that this category is so large. I think there's gonna be place for more than one company to succeed abroad I agree with you. James, thank you so much for being with us. Thanks, Andrew.