© GoPro Electronics Production | January 08, 2018
Hard times for GoPro – exits a market & reduces its workforce
The action camera maker will exit the arial market after selling its remaining Karma inventory.
Trying to access the drone market proved to much for GoPro. Karma has faced margin challenges in an extremely competitive market. To this we also have to add the recall of approximately 2’500 Karma drones – due to units losing power during operation – that happened back in November of 2016 and whatever implications it had on the brand value and product it self. In a press release from the company, detailing certain preliminary financial results for the fourth quarter ended December 31, 2017, the company announces that it is in fact exiting the arial market once it has sold out its existing Karma inventory. For the forth quarter of 2017, the company expects revenues of about USD 340 million. Fourth quarter revenue includes a negative impact of approximately USD 80 million for price protection on HERO6 Black, HERO5 Black and HERO5 Session cameras, as well as the Karma drone. The company expects GAAP gross margin for the fourth quarter of 2017 to be between 24% and 26%. GoPro expects GAAP operating expenses to be between USD 136 million and USD 140 million for the fourth quarter of 2017. The company ended the fourth quarter with cash and cash equivalents of USD 247 million, up USD 50 million over the third quarter of 2017. "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 the press release. "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." Sales of the newly introduced flagship HERO6 Black camera performed as expected during the quarter. On January 7, GoPro lowered the price of its premium model, HERO6 Black from USD 499 to USD 399. "GoPro is committed to turning our business around in 2018," Woodman continued. "We entered the new year with strong sell-through and are excited with our hardware and software roadmap. 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." The new, ‘sharp focus’ is said to enable an USD 80 million reduction in operating expenses compared to the level of 2017. GoPro is thus targeting an operating expense level of below USD 400 million for 2018 on a non-GAAP basis. The company will achieve this lower operating expense level by; reducing its global workforce from 1’254 employees as of September 30, 2017 to fewer than 1’000 employees worldwide. CEO Nicholas Woodman will also reduce his 2018 cash compensation to a single dollar. And as previously stated in this text, the company will exit the arial market as GoPro has deemed it untenable. The company will however continue to provide service and support to Karma customers.
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