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Fitbit bets on Google Cloud in bid to gain appeal with health systems

Fitbit executive says health partners want products that easily scale and integrate with their systems

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By Emily Bary


Fitbit
Fitbit is trying to get more recurring revenue from health-industry players so it can become less reliant on device sales.

Fitbit Inc. plans to move its platform to Alphabet Inc.’s Google Cloud as it steps up efforts to integrate into the broader health ecosystem.

Through the arrangement, announced Monday, Fitbit /zigman2/quotes/202323205/composite FIT -0.16%  will make use of Alphabet Inc.’s /zigman2/quotes/202490156/composite GOOGL -1.66%   /zigman2/quotes/205453964/composite GOOG -1.67%  health-focused application, and employees from the two companies will work together on interactions with health systems, Fitbit said. The company expects that the move will enable it to more easily interface with electronic medical-records software and leverage artificial intelligence to help spot patterns in health data.

Fitbit’s stock is up 9.6% in Monday’s session.

/zigman2/quotes/202323205/composite FIT 6.43, -0.01, -0.16%

Ease of integration with existing systems and the ability to scale are “the types of things that future customers would look at and do look at,” Adam Pellegrini, the head of Fitbit’s health solutions business, told MarketWatch ahead of the official announcement. “When you add on the machine-learning aspect, then absolutely people will look at this as a smart system that can scale and leverage the Fitbit brand.”

Fitbit is in the midst of a transition as it shifts its business model from one focused on device sales to one that brings in recurring streams of revenue. The company has been working with health-industry players like UnitedHealthcare, part of UnitedHealth Group Inc. /zigman2/quotes/210453738/composite UNH -0.50% , to integrate its devices into health plans, so that participants can get financial rewards from their insurer for meeting exercise goals. The idea is that insurers will find it worthwhile to compensate customers for measuring and meeting fitness objectives so that they stay healthier and better avoid costly health problems.

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Fitbit’s chief executive James Park recently told MarketWatch that the company now wants to go beyond merely tracking steps. The company bought coaching platform Twine Health earlier this year, which is the platform Fitbit plans to move to the cloud. Fitbit hopes that ultimately it can take the data it accumulates, detect patterns, and suggest to users specific behavioral changes, a suite of services that health-care companies might be willing to pay for.

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“We can use Google’s artificial intelligence and machine learning to give someone’s care team better insights and better predictive, proactive recommendations,” Pellegrini said.

Google is competing with Amazon.com Inc.’s /zigman2/quotes/210331248/composite AMZN -2.25%  Amazon Web Services and Microsoft Corp.’s /zigman2/quotes/207732364/composite MSFT -1.04%  Azure for corporate cloud-computing customers. Google parent Alphabet disclosed in February that Google Cloud had surpassed $1 billion in quarterly revenue; AWS reported quarterly revenue of $5.5 billion last week and is believed to be the largest of the cloud competitors, while Microsoft said Azure grew by 93% year-over-year in its most recent quarter.

Fitbit shares are up 1.4% over the past 12 months, while the S&P 500 index /zigman2/quotes/210599714/realtime SPX -0.84%  has gained 12%.

/zigman2/quotes/202323205/composite
US : U.S.: NYSE
$ 6.43
-0.01 -0.16%
Volume: 1.73M
Sept. 17, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$1.75 billion
Rev. per Employee
$887,590
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/zigman2/quotes/202490156/composite
US : U.S.: Nasdaq
$ 1,487.04
-25.05 -1.66%
Volume: 2.00M
Sept. 17, 2020 4:00p
P/E Ratio
33.17
Dividend Yield
N/A
Market Cap
$1031.41 billion
Rev. per Employee
$1.39M
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/zigman2/quotes/205453964/composite
US : U.S.: Nasdaq
$ 1,495.53
-25.37 -1.67%
Volume: 1.88M
Sept. 17, 2020 4:00p
P/E Ratio
33.36
Dividend Yield
N/A
Market Cap
$1031.41 billion
Rev. per Employee
$1.39M
loading...
/zigman2/quotes/210453738/composite
US : U.S.: NYSE
$ 304.98
-1.54 -0.50%
Volume: 2.39M
Sept. 17, 2020 4:00p
P/E Ratio
17.15
Dividend Yield
1.64%
Market Cap
$291.30 billion
Rev. per Employee
$754,157
loading...
/zigman2/quotes/210331248/composite
US : U.S.: Nasdaq
$ 3,008.73
-69.37 -2.25%
Volume: 6.45M
Sept. 17, 2020 4:00p
P/E Ratio
115.65
Dividend Yield
N/A
Market Cap
$1541.79 billion
Rev. per Employee
$359,671
loading...
/zigman2/quotes/207732364/composite
US : U.S.: Nasdaq
$ 202.91
-2.14 -1.04%
Volume: 34.01M
Sept. 17, 2020 4:00p
P/E Ratio
35.23
Dividend Yield
1.10%
Market Cap
$1551.75 billion
Rev. per Employee
$902,473
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
3,357.01
-28.48 -0.84%
Volume: 2.74B
Sept. 17, 2020 5:14p
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Emily Bary is a MarketWatch reporter based in New York.

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