Why Apple's Business Model Won't Work For Peloton And How The Fitness Company Can Turnaround Its Business

Beleaguered fitness platform Peloton Interactive, Inc. PTON, which had taken a leaf out of tech giant Apple, Inc.'s AAPL business model, may need to rethink this strategy.

Peloton's Problem: Apple has found much success with its approach of combining its hardware, software and services into one package, and Peloton was quick to adopt this approach, Bloomberg columnist Mark Gurman said.

Peloton designs its own bikes and treadmills and has developed its own operating system that runs over Android, the writer noted. It also offers its own fitness content subscription service, he added.

The columnist noted that Peloton stumbled with this strategy, as it could not manage its supply chain. As the company moved from shortage to surplus, losses continued to mount and growth slowed, the writer said.

The acuteness of the problem hurt Peloton so much so that it had to let go of executives and employees, revamp its management team and embark on big cost-cutting initiatives, Gurman said.

Even as Peloton is going about setting its house in order, talks of a potential acquisition have begun doing the rounds, with Apple, Amazon, Inc. AMZN and Nike, Inc. NKE being discussed as potential suitors.

Related Link: Apple Fitness+ Vs. Peloton: How Do They Stack Up?

Potential Solution: The solution for Peloton's travails is "exiting the hardware business and focusing entirely on software and content," Gurman said.

Peloton, according to the columnist, has the best software and content for treadmills and exercise bikes. Its app for iPhones, Android phones, tablets and set-top boxes is also top-notch, he added.

"The company should reinvent itself around those strengths," Gurman said.

Peloton can make money from royalties and subscriptions for its operating system, giving a share of its subscription fees to its potential hardware partners, the columnist said. The company can also earn revenues from its digital-only subscribers, who number around 900,000, he added.

"By moving on from hardware, Peloton could make its business more sustainable in the long term. And if it does want to pursue a deal, it will be all the more attractive to a suitor," Gurman said.

Apple closed Friday's session down 2.02% to $168.64 and Peloton fell 7.42% to $34.68.

Related Link: Does A Potential Peloton Acquisition Make Strategic Sense For Apple?

Photo: Courtesy of press.onepeloton.com