Fitbit Beats Expectations In Quarterly Earnings, Then Named As Defendant In Yet Another Jawbone Lawsuit

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Fitbit had a busy Monday. The company announced its quarterly earnings, which outpaced analyst estimates by a wide margin, but then watched the good news turn bad as its stock price dropped eight percent on the revelation that it was preparing to sell an additional seven million shares of common stock to raise capital. In addition to its hectic day in the stock market, Fitbit was also named in yet another lawsuit by its chief rival, Jawbone.

The biggest news of the day for Fitbit was undoubtedly its quarterly report, which was stellar. The company reported $403 million in revenue, up 168 percent from the same quarter last year, and beating analysts forecasts of $359 million by a wide margin. EPS was $0.19, nearly double analyst forecasts of $0.10. The impressive quarter was driven by sales reaching 4.8 million devices in Q3, and speaks volumes to Fitbit’s ability to thrive in a market once expected to be consumed by the emerging smartwatch market. The company set its year end revenue guidance at $1.7 to $1.8 billion. Ordinarily, stock prices soar on such news, but within Fitbit’s earnings report the company announced that it was preparing to sell an additional seven million shares, while at the same time releasing restrictions on employee stock options that would potentially add an additional 14 million new shares to the market. The fear that a flood of additional stock was about to hit the market sent share prices down eight percent by the end of trading Monday.

Jawbone also did its part to keep things interesting on an already turbulent day. The company filed a countersuit against Fitbit in a patent infringement case Fitbit initiated in September. In the complaint, Jawbone suggests that Fitbit’s original suit was frivolous and argues that its patents were not “duly and legally issued” by the US Patent and Trademark Office.  The counterclaim goes on to make a case for Fitbit’s patents to be invalidated. Next, Jawbone argues that Fitbit has established a monopoly,  arguing “Fitbit currently holds a dominant position in the market for wearable fitness trackers. It is attempting to preserve this market power through illegitimate and unlawful attacks on Jawbone, its primary competitor. These actions constitute willful monopolization.”

The countersuit is the fourth lawsuit that Jawbone has filed against Fitbit, following three that it filed this summer alleging trade secrets theft and patent infringement. A third filed late this summer with the International Trade Commission sought an injunction to prevent Fitbit from importing its devices into the US. Despite its legal battles, Fitbit has secured a dominant position in the wearables market.


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