Fitbit reportedly missed expectations with its preliminary financial report for the last quarter of 2016, but its latest financials also show some reason for optimism and even suggest that the company is looking into creating a smartwatch in order to diversify. Although these are preliminary numbers, Fitbit is expected to report missing its previously announced guidance range of $725 million and $750 million by approximately $150 million. Growth for the full year also missed the company's previous forecast by around 9 percent. However, the world leader in wearables is expecting to post quarterly sales of around 6.5 million devices. The company's 2016 earnings are expected to be around "$32 million in non-GAAP free cash flow" and $700 million in "cash, cash equivalents, and marketable securities."
In addition to those numbers, the preliminary results also stated that at least one partial reason for the shortcomings can be found in surprisingly weak Black Friday and holiday sales in established markets. The report stated that certain steps will be taken to reduce operating costs and address the company's missed goals. Fitbit's preliminary financials have also confirmed that the company will be laying off around 110 employees, i.e. six percent of its total workforce. However, the number of layoffs is actually lower than previously expected. As a symbolic gesture, co-founders James Park and Eric Friedman have both reduced their 2017 salaries which will now amount to only a single dollar.
Fitbit's report also contains some preliminary guidance for 2017 as it states that the company's revenue guidance amounts to between $1.5 billion and $1.7 billion. Finally, the long-term non-GAAP gross margin has been adjusted to 45 percent, down from the previous 50 percent target. These numbers are said to be based on the current performance of the company which is less than optimal. On a more positive note, the wearable maker did report that sales in Europe, the Middle East, and Africa were not necessarily as slow as they are everywhere else. In these regions, Fitbit saw increases in revenue of up to 58 percent during the fourth quarter of 2016. Fitbit claims things are looking up as the firm already started taking steps to improve its performance in the second half of 2017.