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GoPro Closes Drone Division & May Just Put Itself Up For Sale

Gungho Cowboy

GoPro is off to a bad start this 2018 with the announcement that it will be closing its Drone Division, shedding around 250 – 300 jobs, reduced the price of the GoPro Hero Black, and is said to have hired JP Morgan to help it find a potential buyer. Here are the highlights of the press release on preliminary 4th Quarter 2017 results from the company last 8 January 2018:

“In 2018, GoPro will continue to innovate with several new products aimed at new and existing customers. GoPro's sharper focus will enable an $80 million reduction in operating expenses compared to 2017 levels, resulting in a target operating expense level of below $400 million for 2018 on a non-GAAP basis.

The lower non-GAAP operating expense target will be achieved through a variety of strategies, including:

  • GoPro is reducing its global workforce from 1,254 employees as of September 30, 2017 to fewer than 1,000 employees worldwide.
  • GoPro founder and CEO Nicholas Woodman will reduce his 2018 cash compensation to $1.
  • Although Karma reached the #2 market position in its price band in 2017, the product faces margin challenges in an extremely competitive aerial market. Furthermore, a hostile regulatory environment in Europe and the United States will likely reduce the total addressable market in the years ahead. These factors make the aerial market untenable and GoPro will exit the market after selling its remaining Karma inventory. GoPro will continue to provide service and support to Karma customers.”

The Hero 6 Black’s pricing has been reduced by US$100, from US$499 to US$399 as of Sunday, 7 January 2018.

GoPro is having a hard time in the market as sales have gone down, even if the company has been in black. In 2016, it released its first drone offering, the Karma drone, and it was plagued with problems that it is crashing that the company initiated a recall of the drone. In that year, the company lost 373 million according to The Verge. Its main rival in the drone market, the China-based DJI, has been going from strength to strength releasing models to negate the impact of the Karma drone on its market share, such as the release of the Mavic Pro and the Spark giving drone users two price points in owning camera drones.

Whilst GoPro has a strong following in the action camera market, especially amongst adrenalin junkiez and airsofters, the market is highly competitive. Most of the biggest electronics companies such as Sony and Olympus are now in the market, competing at the high-end price areas and Chinese companies offering affordable and capable action cameras that can readily use the mounts and accessories made for GoPro action cameras. Thus, there are more choices and prices for consumers in the action cam market that may make GoPro’s position as market leader, untenable.

The question is, if GoPro puts itself up for sale, which company will be interested. Will the electronic giants be interested or a company in Silicon Valley be interested in the tech the company has. If you are to ask me, DJI will be the company that will have the most to gain in partnering or acquiring GoPro.

It’s early 2018, so it’s still too early to say if GoPro will forge ahead on its own or with a new owner later the year. Stay tuned.

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