GoPro Inc. said it’s cutting more than 20 percent of its global workforce and putting an end to its drone business after a disappointing fourth quarter.
The company said it now expects sales of about $340 million, well short of its own previous projection of as much as $480 million and the average analyst estimate of $472 million. Revenue took an $80 million hit due to discounting for its Karma drones, as well as its Hero line of cameras, over the holiday season, the company said.
In December, GoPro started lowering prices for its older Hero5 Black cameras due to soft demand, despite the company spending significantly on marketing the product, Chief Executive Officer Nicholas Woodman said in a statement. On Sunday, GoPro also cut the price of its newest Hero camera by $100 to $399.
“There’s only so much market for a $500 standalone camera, so that they cut the Hero6 Black camera price is not a surprise,” said Longbow Research analyst Joe Wittine in an interview. “That they cut it three months after the launch though does illustrate that the action camera market is a difficult market right now.” He downgraded GoPro to a neutral rating Monday.
The stock fell as much as 33 percent to $5.04, its biggest ever drop and its lowest price since going public in 2014.
GoPro has faced intensifying competition in the action camera market, as big tech companies from Samsung Electronics Co. Ltd. to Alphabet Inc.’s Google have started selling similar products. Some analysts have said that the Hero cameras have become a commodity, and that GoPro’s main selling point now is its brand. In November, Raymond James analyst Tavis McCourt wrote that there hasn’t been a noticeable bump from GoPro’s newest camera in the Hero line, and it’s turning up less in searches and app downloads.
GoPro’s Karma drone was supposed to help turn around the business when it was launched in September 2016. Instead, it’s been plagued by problems from production delays to a recall of 2,500 units due to a battery issue. The Karma also faces stiff competition from China’s SZ DJI Technology Co., the biggest drone-maker in the world. GoPro said low margins and a hostile regulatory market in Europe and the U.S. makes the drone market “untenable.” It will exit the market after selling its remaining inventory and continue to service existing drones.
Woodman, who was the highest paid CEO in the U.S. in 2014, will reduce his 2018 cash compensation to $1. Chief Operating Officer Charles Prober is leaving the company next month.
GoPro is cutting more than 250 jobs, reducing its workforce to fewer than 1,000 people. The job cuts and business restructuring will result in an estimated charge of $23 to $33 million, most of which will be recognized in the first quarter, the company said.
“GoPro is committed to turning our business around in 2018,” Woodman said in the statement. “We expect that going forward, our roadmap coupled with a lower operating expense model will enable GoPro to return to profitability and growth in the second half of 2018.”