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Make no mistake: Fitbit Inc., the maker of wireless, wearable technology that lets you track steps walked, calories burned and other fitness information from a sensor in a wristband, has already established that it’s a success. It has sold more than 20 million of its products, its revenue last year nearly tripled to $745.2 million, and it’s profitable.
That’s a lot more than you can say about many companies that have gone on to enjoy successful initial public offerings. And that’s not all. Fitbit is a well-recognized brand, in a sector (fitness) where consumers are known to spend generously.
And Fitbit’s product has become so popular that it has arguably altered people’s behavior. You’ve probably heard someone recently boast about how many steps they’ve taken.
What Fitbit Is Missing
Yes, Fitbit filed plans with U.S. regulators Friday to launch its IPO. By some estimates, the Fitbit IPO could raise $100 million or more.
But here’s the thing about IPOs: To have a successful one, you have to have more than momentum and hype beyond a single technology or product.
I could explain at length why I think Fitbit is a great product but not necessarily great IPO material. But it’s really just easier to cite a comparison to the technology company Garmin Ltd. (NASDAQ: GRMN).
Garmin, the maker of GPS navigation technology, is a good example of how swiftly technology changes and how even makers of products that are killer apps one day can be has-beens a short time later.
You don’t have to be very old to remember a time when Garmin’s technology was cutting-edge and Garmin, like Fitbit, became a household name and changed consumer behavior. No more spreading out a map at the steering wheel, no more plotting out your course ahead of time. You could just plug in your final destination to the little device on your dashboard and be directed to the address.
But no sooner had people grown fond of – even dependent on – their Garmins than the Apple (NASDAQ: AAPL) iPhone and other smart phones arrived on the scene, offering a much smaller device that could also give driving directions and perform about 10,000 other gee-whiz functions at the same time.
A One-Trick Pony?
Garmin eventually saw the writing on the wall and has attempted to reverse a decline in revenue by aggressively diversifying into other product areas, but the jury is out on that strategy. What’s clear is that it’s not always enough to be a one-trick pony, and – to mangle an old cliché a bit – it’s hard for old ponies to master new tricks.
So getting back to the Fitbit IPO, it’s entirely possible to love the product but not the stock. It’s hard not to see Fitbit as vulnerable, especially now that Apple has a spanking new watch on the market that packages so many apps on a device you wear on your wrist.
Fitbit deserves a lot of credit for developing, packaging, and marketing a technology that is so simple, yet so powerful and extremely popular.
Unfortunately, in these days of innovation moving faster than the speed of light, I’m not convinced it has the staying power to become a stock for investors who want to buy and hold for the long haul.
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