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Jawbone Fails To Pay Key Business Partners and Has Almost No Inventory In Stock: Sources (businessinsider.com)

Posted by BeauHD on from the down-for-the-count dept.

BarbaraHudson writes: The battle between Fitbit and Jawbone may be coming to an end. Business Insider is reporting that wearable fitness maker Jawbone is facing some serious financial problems as the company has almost no inventory in stock and is running out of options to generate revenue. If you click on any of the products for sale on their site, it will say that they're all sold out. Business Insider reports: "Jawbone's Facebook page is littered with complaints from customers saying they have been unable to get in touch with a customer service representative to help with defective products. The Jawbone Facebook account has been responding to these issues, blaming a backup of complaints for the delays. A Jawbone spokesperson said the complaints were because of Jawbone's customer service restructuring. Another person close to Jawbone told Business Insider that there is almost no inventory left and the company is running out of options to generate revenue. The speculation among some Jawbone employees now is that the company might sell to a private equity firm if it can't raise more money, the person close to the company said. Jawbone also declined to explain why its inventory has sold out. A spokesperson said, 'they have sold through what they have to sell.' The company said it was not because it couldn't pay vendors though. It would not provide any estimate on when products would be available for sale on its site again, but did say it planned to make more products." The report says that, according to an internal NexRep email, the company cut ties with the customer service agency NexRep earlier this month after Jawbone failed to make payments. "The email, written to NexRep employees by a NexRep executive, claims that Jawbone is 'struggling financially' and that it couldn't pay NexRep for its services," reports Business Insider. "It also says Jawbone is 'fighting hard' to raise more funding. 'Jawbone is not able to pay us for past services, and their ability to pay us in the future is uncertain at this point,' the NexRep email reads." This resulted in "many staffers being laid off."

13 of 67 comments (clear)

  1. Unusual situation by operagost · · Score: 4, Insightful

    Usually, we have a company that makes garbage no one wants, so when they liquidate they have a ton of stock. This is unfortunate... and stupid, because it seems like they should have taken SOME KIND of action before they had nothing to sell.

    I wonder exactly how terrible they are when they have a product with a solid demand, yet no one will invest in them. There has to be embezzlement.

    --

    Gamingmuseum.com: Give your 3D accelerator a rest.
    1. Re:Unusual situation by jellomizer · · Score: 2

      Jawbone is more known for high quality Bluetooth ear pieces. When they were popular in the mid 00's. However that isn't a name I would think to look at for fitness monitors. I guess they realized that they weren't going to win early on so never built up the stock to try to flood the market. Especially Jawbone like Apple tries to sell their product at a premium, and flooding the market will lose out their name status.

      --
      If something is so important that you feel the need to post it on the internet... It probably isn't that important.
    2. Re:Unusual situation by pegdhcp · · Score: 3, Informative

      I made one mistake, and bought one of their first generation trackers. That device was difficult to use and software was terrible in UX department. I dropped it to garbage can, after a while, due to small added value to my life versus lots of time and effort invested in usage. Then I have repeated mistake, this counts as stupidity, and bought one of later generation devices. That was working better, but difficult to use, software was better but with some inexplicable tendencies etc. So it was a mixed performance product. Later on device started to generate obviously incorrect data, which turned out to be a software problem, that can only be solved by erasing 1+ years worth data from their online only database. The clip on the device, which was problematic to begin with has broken, with no feasible customer service option available etc. So it is a very nicely designed piece of garbage.

    3. Re:Unusual situation by BarbaraHudson · · Score: 3, Insightful
      Nobody is going to invest in a company that has fallen from a $3 billion evaluation to a $1.5 billion evaluation, and already has sucked up almost a billion from investors with nothing to show for it except requests for more funding, and no new products for over a year. That $1.5 billion evaluation is obviously going to fall further now that the sh*t has hit the fan, resulting in Jawbone being worth less than what the investors have already put into it.

      Sayonara. Jawbone got tempted by the fitness market, but it wasn't a good fit.

      --
      "Transparent" is a shit show that trades on every stereotype going. A man in drag is NOT a transsexual.
    4. Re: Unusual situation by rickb928 · · Score: 2

      "Jawbone is known for being the first big Bluetooth ear manufacturer."

      Ignoring Jabra, this is true. Or, actually, it is false.

      And I did indeed own an original Jabra, several since they were terribly short-lived. And Jawbones, Samsungs, Plantronics, Motorolas, blah blah blah. I was a Bluetooth junky from the very, very beginning. Jabra was first and big. Jawbone came to the party in mid-orgy, had great sets, but got distracted.

      --
      deleting the extra space after periods so i can stay relevant, yeah.
  2. It is a possibility by johnsmithperson123 · · Score: 4, Interesting

    That they were affiliated with Hanjin Shipping, which went bankrupt a week ago and as far as I know their ships are still stuck off of the Pacific coast. If they didn't keep a large inventory missing a shipment could have just done them in. A line of speculation, but plausible at least.

    1. Re:It is a possibility by sinij · · Score: 2

      I could never understand why would any company risk JIT (just-in-time) on anything mission critical. At the same time everyone does it and disasters keep happening.

  3. Fitness trackers not a slimming aid by Anonymous Coward · · Score: 3, Informative

    Probably for the better. According to a study in theJournal of the American Medical Association, JAMA, fitness trackers don't actually help with weight loss. People get fixated on the numbers from the trackers and stop following a recommended diet.

  4. Shouldn't this be in a business journel? by jfdavis668 · · Score: 3, Insightful

    The fits and collapse of a business are better discussed in a business journal. This story isn't really about technology at all.

    1. Re:Shouldn't this be in a business journel? by BarbaraHudson · · Score: 2

      The fits and collapse of a business are better discussed in a business journal. This story isn't really about technology at all.

      If Apple were to collapse tomorrow, would you say the same thing?

      --
      "Transparent" is a shit show that trades on every stereotype going. A man in drag is NOT a transsexual.
    2. Re:Shouldn't this be in a business journel? by trawg · · Score: 2

      Many technologists think that running a business is kind of easy - like it's just a matter of having a good idea, banging out a bit of code, and then bam - you're Zuck or Gates.

      The business of technology is, I think, a very interesting part of the entire process as well. There's a few interesting comments already in this article (e.g., about supply chain financing etc) which many people won't know anything about.

      I'm sure there are many engineers out there that would love to do their own startup - you only have to look at failed Kickstarters to see that a lot of them never get off the ground and in many cases it's because they failed to understand some of the business aspects of it. Building a business around it is challenging almost no matter what you're doing.

      So I think this is an interesting topic (I've already learned a few things from the comments, which is my main reason for returning to Slashdot on a daily basis)!

  5. Not so unusual by sjbe · · Score: 5, Interesting

    I wonder exactly how terrible they are when they have a product with a solid demand, yet no one will invest in them. There has to be embezzlement.

    There doesn't have to be embezzlement. Most common when a company runs into a situation like this is that they are short on cash. The cash cycle of a consumer products company is typically something like this. I've simplified the times to make the example easy to understand:

    1) Place order for components with 30 day terms. Components received within a few days of placing order
    2) Build product between days 5-30.
    3) Pay for components on day 30.
    4) Sell product into distribution channels with 30 day terms on day 30
    5) Receive payment from customers on day 60

    So they are paying for components about 30 days before they get paid by customers in this example . That means that if they run low on cash, they don't have enough money to buy new components to build next batch of new product. What usually happens next is a viscous cycle. They push out the length of time before they pay vendors. Eventually vendors get tired of this and put them on credit hold or demand cash on delivery. This means they don't have enough cash on hand to buy new components to build new product so their incoming cash flow declines which makes it even harder for them to pay vendors. Lather rinse repeat and the company prospects decline.

    This happens all the time to companies. If there is strong demand for products and/or back orders the company might be able to get a bridge loan or investment. If product demand is weak the company is probably looking at bankruptcy.

  6. Safety stock is wasteful and expensive by sjbe · · Score: 5, Informative

    I could never understand why would any company risk JIT (just-in-time) on anything mission critical. At the same time everyone does it and disasters keep happening.

    Money. Storing extra inventory is wasteful and expensive. If the supply chain is sufficiently robust then the risk of a stock out is minimal or can be absorbed if it happens. Companies like Toyota that have JIT production systems generally work very closely with suppliers to ensure reliability and they have draconian punishments if something goes wrong. If a supplier shuts down an auto assembly line with a stock out the fines are (no exaggeration) something like $10,000 PER MINUTE the line is idle so the suppliers are typically highly motivated to not cause a stock out.

    Excess inventory is considered one of the seven deadly wastes. Defects, WIP, overproduction, waiting, motion, transportation, and overprocessing are all unnecessary expenses and companies should strive to minimize them. When you keep safety stock you have overproduced, generated excess WIP, have parts waiting for processing, and moved parts your customer doesn't actually need. All of that costs money. Now granted you have to weigh the cost of that against the cost of a stock out. Sometimes safety stock is unavoidable but it isn't something desirable.