Google’s proposal to acquire Fitbit for $2.1 billion was approved by the latter’s shareholders on Jan. 3, but it is still undergoing regulatory scrutiny in the U.S. and Europe. In both areas, regulatory authorities have expressed concern that the health and other data being collected by Fitbit will be used by Google for other purposes, despite assurances that their confidentiality would be maintained.
Meanwhile, costs of $47,990,000 related to Google’s acquisition led to a net loss of $120.8 million at Fitbit during the fourth quarter of 2019, compared with a profit of $15.4 million in the same period of 2018. The gross margin fell by nearly 15 percentage points to 24.3 percent because of a shift in the product mix, higher promotions, the impact of the U.S. tariffs on imports from China and a benefit recorded last year from the release of warranty accruals.
Fitbit’s revenues declined by 12 percent to $502.1 million in the quarter. Units went up by 8 percent, but average selling prices fell by 19 percent – which was surprising in view of the increasing share of smartwatches in the product mix. Sales were off by 16 percent in the U.S. and by 7 percent in the rest of the world, increasing by 2 percent in EMEA and falling by 40 percent in Asia-Pacific.
Smartwatches represented 50 percent of Fitbit’s revenues for the full financial year, up from 44 percent in 2018. Nevertheless, the company’s total sales were down by 5 percent to $1,434.8 million on an annual basis. The gross margin plunged by 10.1 percentage points to 29.8 percent, and the net loss widened to $320.7 million from 185.8 million in the prior year.
The total number of active users worldwide grew last year by 7 percent to 29.6 million, boosted by “more accessible” prices, said Fitbit. The company sold a total of 16 million devices, with its smartwatch business growing by 45 percent at retail, due to strong demand for Fitbit’s new Versa 2. Revenues from fitbit.com represented 10 percent of revenues, and the Fitbit Health Solutions business rose by 17 percent to $95 million.
