GoPro Quits Drone Business… Is It Looking To Sell Itself Off?

GoPro is killing its drone business, slashing 20% of its staff and is reportedly exploring a possible sale of the company after reporting weak demand for its products.

GoPro today released preliminary fourth quarter 2017 results which paints the company in a struggling situation. The company says it plans to reduce its headcount in 2018 from 1,254 employees to fewer than 1,000. It also plans to exit the drone market and reduce CEO 2018 compensation to $1. The company had previously laid off about 200 employees in November of 2016.

The company said its Karma drone, which cost about $799 without a camera and about $999 with a camera “reached the #2 market position in its price band in 2017, the product faces margin challenges in an extremely competitive aerial market.”. But it said a hostile regulatory environment in Europe and the United States, as well as an extremely competitive market, makes staying in the business untenable. GoPro said it will exit the business once it sells off its remaining Karma inventory.

The $799 Karma drone was first unveiled in late 2016, but proved to be an unfinished and expensive product. All Karma units were recalled in November that year after a fault caused the aircraft to lose power, while reviewers compared the drone unfavorably to rival devices by companies like DJI. GoPro subsequently lost $373 million in 2016, although its financials did improve a little in 2017.

“When we considered the amount of investment in the category relative to the profit margins that are possible in that category, we determined it wasn’t going to continue to be a sound business investment for us,” Woodman said in an appearance on CNBC Monday.

Woodman declined to answer a question about whether GoPro has discussed a possible sale.

CNBC later reported that the company has hired JPMorgan Chase (JPM) to  broker a potential sale of the company.

In a filing Monday the company said that chief operating officer Charles “CJ” Prober and Sharon Zezima, its senior vice president of corporate and business development, are both leaving the company. Proder will leave Feb. 16, while Zezima will leave in March or April. GoPro also said it expects to spend between $23 million and $33 million on restructuring costs, including severance.

In earnings news, GoPro said that revenue for the fourth quarter of 2017 would be approximately $340 million. That’s a big downturn compared to the same quarter in 2016, and even lower than its original — and originally disappointing — prediction for the holiday shopping season of $470 million in revenue. It would also represent the company’s worst financial holiday season since GoPro went public in 2014. In an apparent effort to encourage sales for the flagship Hero 6 Black camera going forward, the company announced a price cut for the device from $499 down to $399.

In a statement, CEO Nicholas Woodman said that GoPro is “committed to turning our business around in 2018.” Woodman said that the company’s new hardware and software roadmap, combined with lower operating expenses, would allow GoPro to return to “profitability and growth in the second half of 2018.” Profitability might be possible, but GoPro’s flying days are over for good.

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