![A Fitbit Surge,with built-in GPS and heart-rate monitors: The company will cut about 130 jobs.](/content/dam/images/g/r/e/p/2/q/image.related.afrArticleLead.620x350.gu2864.png/1485833490598.jpg)
Fitbit said it would cut about 6 per cent of its workforce and warned it would fall short of its fourth-quarter expectations, after holiday sales of its fitness trackers came in much lower than expected.
Shares in Fitbit fell 16 per cent on Wall Street, after it cautioned that it would swing to a net loss over the coming year.
Revenues for the fourth quarter would be more than a fifth lower than it had previously expected, Fitbit said, in the range of US $572m-$580m, suggesting a year-on-year decline of at least 18 per cent. In November, its guidance for sales of $725m-$750m had already come in well below analysts' original forecasts of about $1bn.
Gross profit margins for the quarter would also be "materially below" its previous guidance, Fitbit said, due to a $68m writedown for unused components and manufacturing equipment, as well as $95m in other charges related to discounts, unsold inventory and warranty reserves.
Fitbit also cut its full-year outlook for 2017, telling investors that sales would come in between $1.5bn and $1.7bn, compared with an analysts' consensus of about $2.3bn, with losses per share of 22 to 44 cents, after adjusting for certain items.
In a pre-market statement on Monday, the San Francisco-based tech company said "demand was soft" in its "most mature" markets, which includes the US, especially during the Black Friday sales in November.
However, James Park, Fitbit's chief executive, insisted that the difficulties were a "temporary slowdown and transition period" as it invested in new products, including expanding into the smartwatch market.
Growth was stronger in Europe, the Middle East and Africa, he said, where sales were up 58 per cent in the quarter, and Fitbit's overall active user base grew 37 per cent year on year to 23.2m people.
"Fourth-quarter results are expected to be below our prior guidance range; however, we are confident this performance is not reflective of the value of our brand, market-leading platform, and company's long-term potential," Mr Park said.
As part of its efforts to reduce operating costs, Mr Park and his co-founder Eric Friedman, Fitbit's chief technology officer, will both cut their 2017 salaries to $1.
About 110 employees will lose their jobs, equivalent to 6 per cent of Fitbit's global workforce, as part of an attempt to reduce operating expenses by $200m. Other savings will come from a cut to marketing spending and "optimisation" of research investment.
Despite the slowdown in the fitness tracker business, Fitbit has made a series of acquisitions in recent months as it builds its capabilities to take on Apple in the general-purpose smartwatch category. Low-cost acquisitions have included Pebble, the smartwatch pioneer, Vector Watch of Europe and Coin, a mobile payments start-up.
These deals would "position the company for long-term success", Mr Park said.
Fitbit will report its full results for the fourth quarter on February 22.
Its shares, which were priced at $20 in its initial public offering in June 2015, closed at $6.06 on Monday, giving Fitbit a market capitalisation of $1.3bn.