According to Bloomberg’s latest new report, GoPro, the action camera maker, announced that it was reducing its global work force by 20% and was going to close its drones division after a really poor fourth quarter performance. The company will be knocking off over 250 jobs, thus bringing down their headcount to less than 1000. The downsizing as well as re-structuring will result in an approximate charge of $23-$33 million which will be realized in the first quarter.
GoPro also announced a reduction in its expected sales for the last quarter. The company said that it now expects that its sales from the fourth quarter would be to the tune of $340 million. The company had previously forecast sales of $480 million. The analysts’ target consensus revenue estimates for that period had been $472 million.
The company said that the actual sales fell short of their estimated targets due to discounted sales on the Karma drones and the Hero action cameras during the last quarter.
According to Nick Woodman, the Chief Executive Officer of GoPro, the company had to reduce prices this holiday season due to a weak demand for a number of their products. The old model, the Hero 5 Black cameras were not selling well, despite a huge ad spend on the product. Additionally, the company also reduced the prices on its newest model of the Hero line by $100 dollars. The newest model of the Hero series is now selling at $399.
According to research analyst Joe Wittine from Longbow Research, not many people want to buy a $500 stand-alone camera any more. Thus, cutting the price of the latest Hero6 Black model was not a surprise at all. What was telling, however, was the fact that the Hero6 Black’s price was cut just three months after the new model was launched. This just went to show that the action camera market is going through tough times right now.
Wittine downgraded GoPro’s rating from “buy” to “neutral” this Monday.
The company’s stock prices nosedived 33% after these announcements were made, taking GoPro’s share prices to $5.04 before rising a little to close trading at $6.17. This is the lowest the company’s share prices have dropped since it went public in 2014.
The action camera market has now become a hotly contested battleground for some of the big tech companies like Samsung Electronics as well as Alphabet Inc. According to some analysts, actions cameras have now just become commodities, and that the only thing holding GoPro up is its brand name. Raymond James’ Tavis McCourt, in a note to clients, wrote that there hadn’t been any new innovation in the new Hero6 camera and that the data shows that the product and the company are showing up in fewer searches as well as downloads of apps.
Additionally, the new Karma drone launched by GoPro was to be the next big thing. It was supposed to be the company’s savior when it was launched in September 2016. Unfortunately, 2,500 drones had to be recalled due to battery issues. The drone has also been plagued by other problems such as production delays.
To add to everything, the Karma was facing really tough competition from the SZ DJI Technology Co., the world’s biggest and most popular drone maker. The Chinese drones are the best and the most popular drones in the market today.
CEO Woodman announced that GoPro is going to leave the drone market and sell of its remaining inventory. It will continue to service the current drones for its customers.