GoPro Inc., struggling to get traction with its action-cameras and new drone, is eliminating about 15% of its workforce and shutting down the entertainment division to reduce costs.
The company, which isn’t profitable, will cut more than 200 full-time positions, according to a company statement Wednesday. Tony Bates, who joined as GoPro’s president in June 2014, is stepping down by the end of the year. He was previously an executive vice president at Microsoft Corp. and the chief executive officer of Skype Technologies SA.
The closing of the entertainment division is a signal that the company is finally narrowing its vision. Wall Street has long been skeptical about GoPro’s plans to build a media company around its action-packed GoPro videos online. The shares, which have lost about half their value this year, rose 4.17 percent to $10.24 at 9:41 a.m. in New York.
"They’re focusing on their core activities--and anything else that doesn’t make money, they can’t afford to continue," said Rob Stone, an analyst at Cowen & Co LLC. "The entertainment was part of the overall brand but doesn’t make money and isn’t core, so it’s gone."
GoPro said the restructuring will reduce operating expenses to about $650 million in 2017 and achieve its goal of returning to profitability next year. The company estimates it will incur as much as $33 million in restructuring costs.
GoPro had been banking on its most-recent cube-shaped camera model, the Hero5, and its Karma drone, released in October, to revive growth and its stock price. So far those products failed to be the hits that management had been expecting and earlier this month GoPro lowered forecasts for full-year sales as third-quarter revenue came in lower than analysts’ average estimates.
The company blamed the disappointing results on production problems. A week later, GoPro had to recall about 2,500 drones. It also faces a class action lawsuit that claims the company violated federal securities law by making false and misleading statements about the drone. The complaints include allegations that GoPro knowingly overstated the capabilities of the drone and consumer demand for the product.
Shebly Seyrafi, an analyst at FBN Securities, is lowering his forecast for 2017 revenue from the Karma to $36 million from $150 million, he wrote in a note Tuesday.
After being a one-time tech darling, San Mateo, California-based GoPro is now facing rising competition from Apple Inc. and even Snap Inc., whose camera glasses are also promising a seamless experience from capturing adventure film to posting on social media. In drones, GoPro is up against the dominant player, Chinese manufacturer SZ DJI Technology Co., who also released a new model just a week after GoPro.
