GoPro announces layoffs and end of drone business

Gopro, Inc. - GPRO - Stock Price Today - Zacks

GoPro missed sales by 28.3 percent, cut 2018 guidance and announced a workforce reduction of more than 20 percent. The company has always been criticized by investors for failing to diversify its product line away from its action cameras, which cater mainly to extreme sports enthusiasts. It also released preliminary earnings Monday for the final quarter of 2017 that fell short of analysts' expectations. "Furthermore, a hostile regulatory environment in Europe and the United States will likely reduce the total addressable market in the years ahead".

Meanwhile, Chief Executive Nick Woodman has cut his cash compensation to $1 for 2018. Shares lost 96 cents, or 12.8 percent, to close Monday at $6.56.

Though GoPro is clearly done producing the Karma drone, it says it intends to continue to provide service and support to Karma customers. The company has 1,254 employees as of September 30, 2017, which will be reduced to "fewer than 1,000".

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GoPro hoped its Karma drone would drive growth. That followed multiple reports of technical issues, which caused the drones to drop from the sky as they were flying. So, for now, I think investors would do well to focus first on GoPro's underlying business rather than on the prospect of any potential acquisition premium. In the months that GoPro was dealing with the, uh, fallout from the Karma's problems, DJI released two new smaller and cheaper drones that essentially made the Karma obsolete. "JP Morgan is our banker, but there is no active engagement to sell", GoPro said in emailed comments to Reuters. GoPro's hiring of JPMorgan was reported earlier by CNBC.

The company cut the price of its latest HERO6 cameras to US$399 from US$499 this week, a decision that it said would hurt revenue by around US$80 million in the fourth quarter.

The company was already forced to announce a price cut on December 10 for its core camera product, the HERO5, due to weak pre-holiday sales.

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