Nike's decision to stop developing its FuelBandfitness-tracking bracelet last month sent shockwaves through the wearables industry.
While more futuristic devices such as Google Glass have attracted much of the attention in the nascent wearable technology market, most of the sales so far have been of fitness-tracking wristbands from Nike, Jawbone and Fitbit.
If the one of the world's largest sportswear companies cannot make a success of a health-monitoring wristband, what hope is there for the dozens of start-ups who have been developing similar devices?
But Nike is not giving up on digital health altogether; it is redeploying its efforts away from hardware towards apps. "We are focusing more on the software side of the experience," Nike chief executive Mark Parker told CNBC last week.
Nike does not want to compete in the hardware business against Apple, long rumoured to be working on an 'iWatch' with health-tracking features, and Samsung, whose Gear Fit wristband can track its wearer's steps and heart rate.
Julia Hu, chief executive of fitness tech start-up Lark, came to the same decision more than a year ago.
The $160 Lark wristband and its accompanying smartphone app was being sold in Apple Stores and proving successful in curing customers' insomnia without drugs, she said, but the device was also becoming a constraint. Customers got frustrated with things like Bluetooth pairing and forgot to wear it – a common problem with these sorts of wristbands.
The sophistication of Lark's device was also limited by size and power requirements.
"Because they care about battery life so much, wearables have forsaken the granularity of data," she says. "That is why wearables basically can only tell you how many steps you did today."
So Lark stopped working on the hardware and instead created a new smartphone app, which tracks walking and running without the need for a separate wearable device. Based on the data it collects, Lark suggests tips for getting healthier, for which it charges a monthly fee.
Samsung has bundled the app for free with its new Galaxy S5 smartphone, which contains a motion sensor similar to that used in the Fuelband, Jawbone's Up and Fitbit's products.
"I think the definition of wearable sensors needs to radically change," says Ms Hu. "I think the ultimate wearable sensor is your phone. Instead of spending $100 on a wearable, maybe you'll spend a few bucks a month to get motivation and coaching to get fitter."
MyFitnessPal, a popular online diet-tracking service, last week also added step-counting to its app for the iPhone 5s, which like the Galaxy S5 contains a dedicated motion-sensing chip.
"We see it almost as a gateway drug to understanding the benefits of tracking your health," says Mike Lee, chief executive of MyFitnessPal, which has more than 40 million registered users.
Faced with competition from such apps, some fitness device makers are putting more emphasis on their software, while others are looking to create more sophisticated wearables.
"The sensors and the hardware are nice, but they are table stakes," said Andrew Rosenthal, Jawbone's platform manager, said in an interview in March. "Helping people track information is important but not sufficient. What really matters is helping put the data in context and driving behavior change."
Venture-capital investors are still funding new health app start-ups. Last week, Index Ventures and Forward Partners invested $3.3 million in Big Health, the London-based developer of Sleepio, an app that treats insomnia by analyzing data collected by wristbands such as Jawbone Up.
However, with Samsung and Apple looming large, some investors are becoming more cautious.
"Wearables might be a little bit overheated," says Jeremy Conrad, co-founder of Lemnos Labs, an incubator for hardware start-ups in San Francisco, saying he might only back products catering to small niches. "Wearables are hard but done right could be huge."
More from the Financial Times:
One start-up looking to raise money, Montreal-based Carré Technologies, is focusing on the high-performance end of the market. Its Hexoskin product integrates sensors into a shirt and can track an athlete's heart rate, rhythm, steps taken and breathing patterns. Canadian skiers used it when training for the Sochi Winter Olympics.
Beyond such niche cases, some in the tech industry believe that most people will be more comfortable using apps on their phones, rather than wearing or carrying yet another gadget.
"These devices are asking to share real estate on my body," says Lenovo's chief technology officer, Peter Hortensius. "They're asking to share my face, they're asking to share my wrist. Are people going to do that? That's a very personal thing."
Lenovo is testing wearable devices in its labs but is waiting to see how the market develops before releasing anything.
"I'm not clear what the winning wearables solution is, so we're going through some very interesting experiments right now to figure that out," Mr Hortensius says. "We don't think it's imminent that it's going to be a mass, mass volume thing so we're trying to figure out what the right thing to do is."