GoPro got absolutely smoked in 2016. Not only did the company’s stock price fall by more than half since January, but it also saw production delays on its new flagship Hero5 Black camera and Karma drone.
In Q3, the company reported its revenue had plunged by 40% and that it had to cut its full-year revenue expectations. Shortly thereafter, GoPro (GPRO) was forced to issue a recall of the Karma, as the drones were losing power mid-flight.
The result: GoPro was forced to cut 15% of its workforce — about 200 full-time jobs — and shutter its entertainment division. The price of the company’s corporate restructuring, which GoPro says will cost between $24 million and $33 million, is expected to drag down Q4 earnings.
Is this the end of GoPro as we know it? Not if it can turn things around in 2017.
Near-term success is a must
Prior to announcing its restructuring, GoPro predicted it would return to double-digit growth in 2017. But, according to Pacific Crest Securities’ Brad Erickson and Elliot Arnson, that would mean the company would see improvements in both camera and drone sales — which the duo calls “optimistic.”
IDC Research’s Christopher Chute says the next six months for GoPro will be critical to the company’s future. First, the company has to fix its past miscues. One of those mistakes — GoPro’s decision to launch an entertainment division — seems to have made sense at first, Chute explains. The division was to create original GoPro content captured on GoPro cameras.
But it appears that GoPro overestimated the public’s desire to consume GoPro-captured content, especially when much of it was already readily available on places like YouTube. According to Chute, GoPro didn’t do well in terms of articulating what its original content had to offer. As a result, GoPro scrapped the entire venture.
Still, Chute said, GoPro’s attempt to move away from its core camera hardware is the right one. The company’s execution, however, leaves something to be desired.
Double down on drones
One way GoPro could reduce its dependence on its camera business is to get deeper into the drone industry.
“They should double down on the drone space,” Chute said. “I think there is an opportunity for GoPro there, because they can extend the value that they built with optics and imagery. Maybe that’s something they are considering doing but haven’t told anyone.”
Unfortunately, GoPro’s Karma received mediocre reviews because the drone didn’t offer much in terms of smart features. It didn’t have obstacle avoidance, its battery life was short, and it was big. Most disappointing of all, it didn’t come with an auto-follow feature that allows the drone to automatically track and follow you wherever you go.