Following the content and structure of the Performance Assessment Template, assess Fitbit's ability to CREATE value and their ability to CAPTURE value. Show your work and reference the data/your calculations to explain your conclusions.

BASED ON THESE INFORMATION

depreciation, and amortization) to range from $400 million to $480 million for the 2016 fiscal year. ll1e projections were based on Fitbit's stellar 2015 fiscal year when annual revenue increased to $1.86 billion from $745 million in 2014 and net earnings increased to $175. 7 million from $131.8 million in 2014. However. 2016 proved to become a much more troubling year than managment expected. The company's 2016 revenues failed to meet expectations. it recorded a loss of $102.8 mi.Ilion, and adjusted EBITDA fell from $389.9 million in 2015 to $30.0 million in 2016. The company's declining financial performance continued during the first quarter of 2017 with its net loss exceeding $60 million for the three-month period ending April 17, 2017. Exhibit S presents Fitbit's consolidated statements of operations for 2014 through the first quarter of 2017. The company's condensed consolidated balance sheets for 2015 and 2016 are presented in Exhibit 6. Analysts' Assessments Analysts were becoming concerned about Fitbit's long-term viability as early as February 2016 when its share price declined by 20 percent by month-end. An analyst with Global Equities Research, Trip Chowdry, ' I \ , EXHIBIT 5 , suggested that he believed the stock could fall another SO percent and speculated, "Gradually the market for single-purpose devices (fitness tracker) is heading toward zero, and there is nothing FJT can do to reverse the trend." 11 In addition, Chowdry commented that unlike Apple, Inc., Fitbit does not have a group of developers or a way of generating income as Apple does. Even though the Fitbit tracker products were much cheaper than Apple's($ I 29 as compared to $349 for the cheapest Apple Watch Sport), Apple had an inventory of more products than Fitbit. Activity tracking is just a feature used by Fitbit, and this feature was being used i.n many other devices by a variety of companies. Leerink analysts were cautious about projections for sales increases at Fitbit and suggested a target price to buy the stock of $18. The analysts suggested that ongoing sales would likely remain sluggish after initial increases related retailer inventory needs for new products were satisfied. 12 Fitbit's Strategic Inflection Point Going into mid-2017, James Park and Eric Friedman were confronted with how best to bolster Fitbit's.

tHE NUMBERS YEARS ARE 2017,2016,2015,2014

Revenue $298,942 $2,169,461 $1,857,998 $745,433

Cost of revenue 180,643 1,323,557 956,935 387,776

Gross profit 118,299 845,884 901,063 357,657

Operating expenses:

Research and development 87,785 320,191 150,035 54,167

Sales and marketing 91,174 491,255 332,741 112,005

General and administrative 30,746 146,903 77,793 33,556

Change in contingent consideration (7,704)

Total operating expenses 209,678 958,349 552,865 199,728

Operating income (91,379) (112,465) 348,198 157,929

Interest income (expense), net 1,096 3,156 (1,019) (2,222)

Other expense, net 533 14 (59,230) (15,934)

Income before income taxes (89,750) (109,295) 287,949 139,773

Income tax expense (29,671) (6,518) 112,272 ?

Net income $ (60,079) $ (102,777) $ 175,677 $131,777

market standing and turn around the company's rapidly deteriorating financial performance. It was a common comment among analysts that Fitbit needed to be more than a one-product company. Since the activity tracking feature was being used in many other devices by a variety of companies, Fitbit had to think of new uses of the tracker as well as new devices. As one journalist suggested, "Standalone fitness trackers are iPods in a world that's moving to i Phones." 13 . After all, Park had recently commented, 'The next big leap will come when we tie into more detailed clinical research and create devices that can make lightweight medical diagnoses. You look at blood glucose meters today, I wouldn't necessarily say that those are the most attractive or consumer-friendly devices. I would say consumer-focused companies, whether it's us or Apple, probably have an inherent advantage in the future."14 One possibility for the company was to become a platform-rather than just a product.

	FQ1	2016	2015	2014
Gross Margin	118299/298942 = 0.395725592	2169461/845884 = 2.564726	1857998/901063 = 2.062007	357657/745433 = 0.479798
Operating Margin	-91379/298942 = -0.305674679	-112465/2169461 = -0.05184	348198/1857998 = 0.187405	157292/745433 = 0.211008
Return On Assest		-102777/1820226 = -0.05646	175677/1519066 = 0.115648