Struggling GoPro cuts staff, grounds drones
Digital camera maker reportedly considering sale or partnership
Action camera maker GoPro is slashing 20 percent of its workforce, grounding its illfated drone camera business and exploring a possible sale following weaker than expected revenue from a disappointing holiday sales period, the company said Monday.
CEO Nicholas Woodman pledged to turn the San Mateo company around this year and keep it independent, but told CNBC that the company would consider a sale or partnership. That followed reports that GoPro has hired J.P. Morgan Chase to explore a sale.
Consumer technology analyst Ben Bajarin of Creative Strategies said he believes a sale to a larger company like Google is “necessary and imminent.”
“They hit a wall in growth and product sales,” Bajarin said in an email. “Being a public company puts a lot of pressure on growth, and they saturated a market.”
The stock during the day fell as much as 33 percent to $5.04, its biggest ever drop and its lowest price since going public in 2014, according to Bloomberg News. The stock rallied to close at $6.56 per share on the Nasdaq, a nearly 13 percent drop.
GoPro said it is cutting its workforce to below 1,000, down from 1,254 employees on Sept. 30. The company laid off 270 full-time workers in March. It now expects about $340 million in fourth-quarter revenue, severely short of its previous estimate of $480 million.
The revenue projection included an $80 million hit the company took after discounting prices of its Hero line of cameras and Karma drone to try to boost sales. In another gesture, Woodman, who founded GoPro in 2002, said he was slashing his cash compensation to $1 for the year, down from $800,000 in 2016.
GoPro’s durable, wearable digital cameras created a new specialty market in action photography and video. But it has struggled to grow beyond its market and faced increasing competition from companies like Samsung and Google.
GoPro launched its own drone in 2016 to take advantage of a trend: the growth in drone sales that was partly fueled by owners attaching GoPro cameras to drones made by DJI of China and Parrot of France.
It became the only major U.S.-based consumer drone maker, but the $800 flying
camera never experienced the effect implied by its name, Karma.
After GoPro launched the line, some Karmas unexpectedly lost power in midair and dropped from the skies. GoPro recalled the drones two weeks after they went on sale. It relaunched the product in February, but struggled to compete with DJI, which offered cheaper camera-packing drones.
Even this week, a post by Reddit member Colin Wehrle described a Karma flying about 330 feet high suddenly losing its GPS navigation.
“And it took off on its own at a high rate of speed,” the post said. “I could no longer control it . ... After about 10 seconds it was gone. Disappeared out of sight. I couldn’t believe it.”
The Karma was an attempt to grow the business that “just didn’t work out,” Bajarin said. “I don’t think it was wrong, it just didn’t work.”
Moreover, GoPro miscalulated the market, believing it could compete as a drone maker while still selling cameras as accessories to other drone manufacturers and consumers, said Gerald Van Hoy, an independent drone and robotics industry consultant. That strategy led DJI to embed its own cameras in its systems, he said.
“So even though you could buy another camera, you would lose functionality, and who would want to do that?” Van Hoy said. “So DJI essentially closed the door on GoPro.”
In a statement, GoPro also said it was leaving the drone business because “a hostile regulatory environment in Europe and the United States will likely reduce the total addressable market in the years ahead.”
But Van Hoy discounted that reason.
“If that were true, then DJI, Yuneec, Hubsan, Parrot and others would not be doing well,” he said.
Dan Gettinger, codirector of the Center for the Study of the Drone at Bard College, also noted the Trump administration has taken steps to ease the development of commercial drones.
The Karma’s downfall comes from a “confluence of factors” and GoPro’s high expectations, he said.
“It all comes down to the fact that they decided to go it alone and make their own system as opposed to pairing up with one of the giants like DJI or Parrot,” Gettinger said.