TomTom is distancing itself from the sports wearable market that is dominated by competitors such as Apple, Fitbit and Garmin, citing weaker-than-expected sales.
In the company’s most recent quarterly earnings report, TomTom, which makes the Spark3 smartwatch and Touch fitness tracker, reported a 20 percent year-over-year decline in consumer revenue, citing a decline in demand for fitness wearables.
“The wearables market has fallen short of expectations,” TomTom CEO Harold Goddijn said on a call this week with analysts. “Because of this and because we want to focus on Autonomos licensing and Telematics businesses we are reviewing strategic options for our sports business.”
The decision resulted in a non-cash impairment charge of 169 million euros in the quarter, which further impeded the company’s second-quarter profitability. TomTom reported a net loss of 160 million euros, compared with a year-earlier profit of 12 million euros. Revenue fell to 253 million euros from 265 million euros a year ago, weighed down by the hardware segment.
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TomTom isn’t the only company struggling to make it in the fitness market. Fitbit, whose entire business is focused on fitness bands and accompanying software, has been struggling to grow its top line as well. In its fiscal first quarter, Fitbit sales plunged to $299 million from $505 million in the same period in 2016, prompting CEO James Park to call 2017 a “transition year.”
In Garmin’s most recent fiscal quarter, fitness wearables sales declined by 3 percent, while its marine, outdoor and aviation GPS systems all experienced growth in the double-digits. Jawbone will be liquidated, according to the Wall Street Journal, while Pebble shutdown last year.
“We see this affecting all kinds of companies from Garmin to TomTom and there’s been a number of other companies that have fallen by the wayside already,” said Ramon Llamas, the research manager of wearables and mobile phones for IDC, a data company that tracks the consumer technology industry.
Earlier this year, IDC predicted that wristbands, which include general fitness bands and calorie counters, would see “slowing growth in the years ahead,” and that smartwatches would continue to undersell traditional watches, even as cellular connectivity among watches becomes more prevalent.
“The sudden softness in the wristband market witnessed at the end of 2016 will carry into subsequent quarters and years,” IDC said at the time.
However, IDC expects both smartwatches and fitness bands to have some staying power. For fitness bands, it’ll be the lower-cost devices with basic features that dominate the mass market.
As for higher-quality sports wearables, professional leagues have been using data collected from machines to optimize player performance, while digital media companies have started to use player-tracking data to enhance the fan-viewing experience.