Fitbit Flex wearable electronic fitness devices sit on display at the Fitbit Inc. pavilion (Photographer: Simon Dawson/Bloomberg)

Fitbit Loses Ground to Apple and Xiaomi in Wearable-Device Race

(Bloomberg) -- Fitbit Inc. fell to third place in the wearable-device market in the first quarter, losing out to rival connected watches and fitness bands from Apple Inc. and Xiaomi Corp.

Fitbit’s share slid to 12 percent of all unit sales from 23 percent a year earlier, according to data from market researcher IDC. The San Francisco-based company saw its dominance fade even as the overall device market grew 18 percent to 24.7 million shipments worldwide. Xiaomi and Apple tied for first place, with about 15 percent each.

Despite the emergence of new competitors, Fitbit had managed to hang on to its lead in wearables for several years, benefiting from its early arrival in the rapidly growing market. In the past year, demand has dropped as consumers turn to newer devices with more functions. Sales also took a hit last year because of manufacturing mistakes.

The company’s stock, which soared as high as $51.90 following a 2015 initial public offering, has plunged as investors lose faith in Fitbit’s ability to resuscitate demand with new products. Shares dropped 1.7 percent to $5.42 at 12:10 p.m. on Monday in New York, and are down more than 60 percent in the past year.

"Fitbit finds itself in the midst of a transformation as user tastes evolve from fitness bands to watches and other products," Ramon Llamas, an IDC analyst, wrote in the report. "This allowed Xiaomi to throttle up on its inexpensive devices within the China market and for Apple to leverage its position as the leading smartwatch provider worldwide.”

Fitbit Loses Ground to Apple and Xiaomi in Wearable-Device Race

Chief Executive Officer James Park is betting that Fitbit’s impending smartwatch will reinvigorate demand and reach new consumers. The company has acquired startups Coin, Pebble and Vector to help produce its first smartwatch. Though Fitbit has a loyal base of users, its foray into the new category will face intense competition from Apple Watch and multitudes of cheaper Android watches. As Fitbit tries to differentiate its newer products with its focus on fitness, Apple has also been doubling down in health tracking. Last month, Apple acquired Beddit, a maker of sleep-tracking hardware and software.