FitBit's fitness trackers face threats on all sides -- from Apple competition to patent-infringement lawsuits.
That sounds a lot like the travails of another device maker -- BlackBerry -- almost a decade ago. Like FitBit, BlackBerry was the established market leader with a ubiquitous gadget and a lower-priced alternative to Apple's shiny new iPhone. It offers FitBit a lesson: Use the capital from an upcoming initial public offering to fund research into innovative technology.
"BlackBerry's failure was the fact that they weren't able to meet the expectations that consumers were looking for and keep up with the times," said Angelo Zino, a New York-based equity analyst at S&P Capital IQ. "FitBit has to find a way to defend the position they've built here."
For now, investors seem willing to bet FitBit will avoid BlackBerry's fate. As it wound up two weeks of meetings with fund managers, the San Francisco company on Tuesday boosted the IPO's size and price range, a sign of strong demand.
FitBit held 85% of the U.S. connected activity-tracker market in the first quarter of 2015, it says, citing industry-research firm NPD Group. Revenue more than tripled in the quarter through March, from a year earlier, and earnings are rising fast.
Though it may not have achieved the status of a "CrackBerry" as the BlackBerry was dubbed for its addictive nature, the FitBit is garnering its own media attention: President Barack Obama was spotted wearing one in March.
This success has attracted an unwanted rival in Apple. In April, the consumer-electronics giant began selling the Apple Watch, with functions to track health, heart rate and athletic activities.
Apple is no stranger to taking on early movers in the device world. In early 2007, when the iPhone was introduced, BlackBerry was a $30 billion market-cap company, with revenue increasing almost 50% annually.
The Canadian company first seemed protected with a lower price and security features that made it a favorite of corporate customers. The lowest-end iPhone cost $499 in 2007, while BlackBerry's Pearl was $199. Similarly, FitBit's highest-end product is still $100 less expensive than Apple's lowest-priced watch.
Form over function?
For BlackBerry, that didn't matter as consumers largely preferred the style and functionality of the iPhone. By 2014, the company held just 0.5% of the global smartphone market, according to IDC data.
Some of FitBit's $400 million in IPO proceeds will be used for research and development, which is critical for anyone taking on Apple because the pace of innovation is incredibly fast, said Jacquie McNish, co-author of "Losing the Signal," a book about the rise and fall of BlackBerry.
"The lesson for anyone in a similar position: there really isn't a margin for error," said Ms. McNish, whose book was published in May.
In an e-mailed statement, BlackBerry said it is "well into a turnaround that is taking it to new markets with innovative products and services."
A representative from FitBit declined to comment.
Become a platform?
One thing FitBit could do is follow Apple's model of letting third parties create apps for its devices, according to Ed Maguire, a software analyst at CLSA.
"If FitBit can manage to become a platform and be able to support innovations from third parties, I think that would be a really viable road to creating more sustainable value," he said.
Another challenge that set BlackBerry behind was a four-year legal battle with NTP Inc. over patents. By the time the lawsuit was settled for $612.5 million in March 2006 -- averting a court-ordered halt to service -- the dispute had deterred customers and allowed competitors to gain market share.
FitBit has been hit with two lawsuits of its own from rival Jawbone over the last month. Jawbone says FitBit's activity-tracking devices use technology protected by three patents owned by BodyMedia Inc., which Jawbone acquired in 2013. In a separate lawsuit, Jawbone alleged FitBit recruited its employees and plundered its trade secrets.
A representative from Jawbone didn't respond to a request for comment.
The worst-case scenario would be an injunction that prohibits FitBit from importing certain parts to make their devices, according to Maulin Shah, managing attorney at patent-research firm Envision IP. FitBit, with 77 issued U.S. patents and 132 pending applications, may come out with a countersuit against Jawbone, he said.
FitBit's patents, which are for technology it developed itself rather than through acquisitions as Jawbone did, show the company is very focused on innovation, according to Mr. Shah.
"FitBit is consumer-facing, and as long as they continue to innovate that would be one way to avoid what happened to BlackBerry," he said.