Jawbone's struggle is a depressing study in how making excellent products sometimes isn't enough

Jawbone CEO Hosain Rahman. Picture: Getty Images

Jawbone, the richly valued maker of wearable gadgets and wireless speakers, appears to be on increasingly shaky financial footing as it struggles to pay vendors and keep inventory in stock.

Jawbone abruptly ended its relationship with the customer service agency NexRep earlier this month after Jawbone failed to make payments, according to an internal NexRep email viewed by Business Insider.

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. 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.

Jawbone also quietly sold part of its speaker business recently, a company representative confirmed to Business Insider.

Jawbone’s failure to pay NexRep had nothing to do with the quality of the firm’s services, the email notes. NexRep stopped working for Jawbone on September 9.

The move affected 93 jobs at NexRep, with many staffers being laid off. Some NexRep employees were transferred to work with other clients, according to a person familiar with the matter.

A Jawbone spokesperson said that the company is reviewing its bills for NexRep and “restructuring” its customer service.

The NexRep vice president who wrote the email declined to comment when contacted by Business Insider. Multiple messages left for NexRep’s CEO went unreturned.

Inventory turbulence

Jawbone also appears to be having inventory problems, a person familiar with NexRep and Jawbone’s relationship said. NexRep previously had access to Jawbone product inventory that it relied on to replace the defective or damaged devices that customers returned, but shipments slowed practically to a halt in recent weeks, according to this person. This made it nearly impossible for NexRep to send customers replacement units.

Another curious sign: All of Jawbone’s products are listed as “sold out” on the company’s website as of this writing. There appears to be limited availability of some Jawbone products on Amazon. Jawbone hasn’t released a new product since the spring of 2015, but the company has said it is developing a “clinical grade” fitness tracker.

Jawbone products sold outJawbone.comAll the products on Jawbone’s website are listed as sold out

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.

Running out of options

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 company has sold its customer service inventory to a third-party based in New Zealand, the same party that previously purchased inventory earlier this year, this source says. A Jawbone spokesperson disputed this claim, saying the company did sell some inventory to a distributor in New Zealand, but still has some inventory left to handle customer service requests.

The Information reported in August that Jawbone was having difficulty paying vendors and that it was considering a sale of the company. 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 declined to comment on a possible sale.

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 would not say if the low inventory was because it couldn’t pay vendors, nor would it provide any estimate on when products would be available for sale on its site again.

Jawbone CEO Hosain Rahman is seeking investment from an Asian company to keep the company going as it targets a mid-2017 release date for its next product, the person close to the company said. In the meantime, the company is essentially operating week to week, according to the source. Jawbone declined to comment on its cash position and its product roadmap.

Several people are leaving the company each week, according to multiple sources. This summer, the company lost its head of product Travis Bogard. Bogard is now working at Uber, according to his LinkedIn page.

Jawbone has also been trying to sell its Jambox Bluetooth speaker business since early this year. A Jawbone spokesperson said “part” of the Jambox business has been sold, but did not elaborate further.

Jawbone raised $165 million in January at a $1.5 billion valuation, according to Kara Swisher of Recode. That valuation was down from its peak valuation of about $3 billion, Swisher reported. A Jawbone spokesperson told Business Insider in August that those valuation numbers are incorrect, but declined to elaborate further.

Jawbone has raised about $983 million in total, according to Crunchbase, which tracks funding for private companies.

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