Fitbit unveils health-focused smartwatch to revive ailing demand

The Fitbit Ionic Sportswatch.

Fitbit desperately needs a hit.

The company unveiled its first smartwatch on Monday, hoping that the health-focused features of the device will reverse the hardware maker's declining influence in the wearables market.

The smartwatch, called the Fitbit Ionic, costs $499.95 in New Zealand. It has a square touchscreen similar to the one on the Apple Watch. It includes a heart-rate monitor, GPS tracking and four-day battery life. The watch, which is water resistant up to 50 meters, can make wireless payments and store music offline from Pandora Media.

Fitbit recently lost its position as the top seller of wearable devices, falling behind Apple and China's Xiaomi. Since going public two years ago to much fanfare, the novelty of its wrist-worn devices have waned with investors. Shares plunged to US$5.73 at the close Friday, about a quarter of the US$20 IPO price, as consumer tastes have evolved to favor products with more functions and third-party apps.

"Demonstration of consumer acceptance of the product is going to be very important for the stock: investors are very focused on their ability to stabilize," said Jim Duffy, an analyst at Stifel Nicolaus & Co.

The smartwatch is the company's first device to include a sensor that can estimate blood oxygen levels, called a relative SpO2 sensor. The Ionic will be pre-loaded with the apps for weather, payments, fitness, Starbucks Corp. and Pandora.

"Smartwatches are a platform for us to deliver the most powerful health tools the market has seen," Chief Executive Officer James Parks aid. "The larger form factor lets us integrate many more advanced sensors, provide richer display and user interfaces for people."

Park is betting that its fitness-focused device will reinvigorate demand and differentiate the product from competitors in the smartwatch market, which is expected to reach almost US$18 billion in 2020, according to data from IDC. Fitbit is encouraging developers to make apps that focus on health and fitness. The company also is rolling out audio coaching sessions and virtual trainers on the smartwatch that take users through personalized workout sessions. It's also introducing guided health programs that give step-by-step advice to consumers on how to eat healthier, sleep better and exercise more.

In addition to the watch, Fitbit is rolling out an upgraded smart scale, the Aria 2, and US$129.95 bluetooth headphones that pair with the smartwatch.

The watch will compete with dozens of cheaper Android products and Apple Watch, which already has an established app store, tight integration with the iPhone, built-in music and payments services, not to mention hundreds of accessories. Fitbit originally planned to debut its watch this past spring, according to a person familiar with the situation, but various setbacks forced the company to delay the release.

The delays were partly because Fitbit has built its custom operating system, which requires an entire ecosystem of apps. It's already a risk for developers to make apps for wearable devices, which haven't caught on as widely as smartphones. But among the wearable devices, it's a safer bet to develop for Android or Apple watches, which already have a proven user-base.

The company is trying to build upon the developer community created by watch maker Pebble, which Fitbit acquired last year. Developers will be able to share their apps with a private community or submit for a review process to be included in Fitbit's app gallery.

For years, Park has been saying that he wants to transform Fitbit into a digital-health company. With the smartwatch rollout, the company has given hints as to what that plan will look like. Fitbit is exploring how they can aid consumers with heart health, chronic diseases, stress and sleep apnea, according to Shelten Yuen, vice president of research.

The company has started using the Fitbit Ionic to work with clinical researchers to measure sleep apnea. In the next several years, Fitbit aims to eventually deliver consumer subscriptions that predict health outcomes to move beyond hardware and into a recurring revenue stream, according to Joe Wittine, an analyst at Longbow research.