Commentary

GoPro Hits Turbulence As Drone Flops And Market Goes Mainstream

GoPro yesterday grounded its drone division — on which its hopes for a revival once soared — eliminating about 250 jobs, or about 20% of its workforce. The San Mateo, Calif.-based company also lowered its guidance for the fourth-quarter holiday season in a preliminary report and has hired JP Morgan Chase to consider a possible sale or partnership with another company. Its shares tumbled 20% on the news. 

“GoPro has become an examplar of the tech mantra that ‘hardware is hard,’” writes Axios’ Dan Primack. “The Silicon Valley company was valued north of $11 billion shortly after its IPO” — which JP Morgan led in 2014 — “but has since fallen to around the $1 billion mark.”

“As we noted in our November earnings call, at the start of the holiday quarter we saw soft demand for our Hero5 Black camera,” GoPro founder and CEO Nicholas Woodman says in a statement. “Despite significant marketing support, we found consumers were reluctant to purchase Hero5 Black at the same price it launched at one year earlier. Our December 10 holiday price reduction provided a sharp increase in sell-through.”

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But the $340 million it now expects to generate for the quarter — the final results will be announced early in February — is about 28% below the $470 million it had expected. GoPro’s rapid ascent and decline should “serve as a cautionary tale” to all of the wannabes at the Consumer Electronics Show, which opens in Las Vegas today, according to Dan Gallagher in the Wall Street Journal.

“The action camera maker deserves credit for creating a market for a new type of device when cheaper and more convenient alternatives abounded. In its best year to date, GoPro sold more than 6.5 million cameras as Apple Inc. was selling its mega-popular iPhone 6, which featured a strong camera in its own right. GoPro successfully tapped into the ethos of the Instagram generation to find a segment of the population willing to pay up for high-quality, hair-raising footage,” Gallagher writes.

That said, as the subhed notes, the “struggling camera maker’s failed efforts at diversification leave investors with little to hang on.”

“Despite continued dedication among adrenaline junkies and adventure athletes,” notes Slate’s Christina Bonnington, it has been a difficult flight for the company following “the biggest consumer electronics IPO in about 20 years.”

Since 2014, “GoPro’s challenge was to transform itself from a successful camera seller into a major media entity. To kickstart those efforts, it launched an Xbox Live channel and made a deal with Virgin America for in-air entertainment. Its website also acted as a media portal, collecting top photos and videos. Then, amid our booming drone fixation, the company diversified its hardware offerings with the Karma drone in 2016. But the company had to recall the $799 drones that November, when it was discovered that the device could lose power during operation,” Bonnington continues.

Plus, CFRA senior analyst Angelo Zino tells Rex Crum of the Santa Cruz Sentinel, GoPro’s days of being a “must-have” product appear to be over even as its mission expanded.

“What else can they really do with these cameras?” he asked. “GoPro had several great years in the sports-image capturing market, but if they were to grow, they had to do it with soccer moms and other customers who use cameras differently. And they’re finding that there isn’t much of a market, or desire from those types of customers for GoPro’s products.”

Those types of customers, in fact, were more likely to shell out $249 for the new Google Clips wireless smart camera, which “uses artificial intelligence to automatically capture several seconds of motion clips when its algorithms detect something photo-worthy,” as Slate’s Bonnington points out. And you “can clip it to your shirt [or] a stroller handle.”

As for its future direction as a standalone company, or not, Woodman tells Bloomberg Technology that “I can confirm that JP Morgan is in fact our banker, but we have not engaged them to help us sell the company,” Casey Newton reports for The Verge. “He said that GoPro was potentially interested in selling, but not actively searching for a buyer,” Newton writes. 

“If there were an opportunity for GoPro to partner up with a larger organization that could help us scale the company,” Woodman says, “that’s certainly something that we would consider. But it’s not something that we’re actively engaged in at the moment.”

While all that is mulled, or not, Woodman himself will be taking a mere $1 in compensation this year. Talk about a spiraling descent: Just a few years ago, he was purportedly the best-paid CEO in the U.S. ($284.5 million in 2014, Bloomberg estimated.)

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