GoPro announced Monday that it’s throwing in the towel on its drone business and cutting 20 percent of its workforce after failing to meet sales expectations.
The action camera maker, which suffered a 22 percent decline in its stock price Monday after issuing a profit warning ahead of its fourth-quarter earnings results, lowered its revenue outlook for the key holiday quarter to $340 million, compared with its previous projection of $470 million.
The company cited weak demand and price productions that affected key products. In late 2017, GoPro cut prices for the Hero 5 Black and Hero 5 Session cameras, as well as the Karma drone. This past weekend, it lowered the price of its newest camera, HERO 6 Black, to $399 from $499.
“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 CEO Nicholas Woodman said in a statement. “We found consumers were reluctant to purchase HERO5 Black at the same price it launched at one year earlier.”
Woodman said the company is looking to streamline operating expenses in 2018 in an effort to turn around the business and potentially return to a profit in the second half of 2018.
“I’m still happy we took $GPRO public because otherwise, we’d have far less visibility, globally.” – Woodman, on @CNBC pic.twitter.com/987QlnLWzb
— Carl Quintanilla (@carlquintanilla) January 8, 2018
To do that, GoPro said it’s exiting the “extremely competitive aerial market,” which is dominated by companies such as DJI and Parrot on the professional level and remains extremely fragmented on the consumer level. Twenty percent of its workforce, or roughly 250 jobs, will be eliminated by the move.
In addition to the competition, the company blamed a “hostile regulatory environment” for drones in Europe and the U.S., which it said could reduce the total addressable market for drones in coming years.
“These factors make the aerial market untenable and GoPro will exit the market after selling its remaining Karma inventory,” GoPro said.
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GoPro launched the Karma drone in October 2016 but then had to recall it a few weeks later due to mechanical issues that caused some units to lose power unexpectedly midflight and fall out of the sky. It relaunched the drone last January after fixing those issues, completely missing the 2016 holiday season.
This is the second double-digit percentage workforce reduction for GoPro in the past year. Last March, it axed 270 jobs, which followed roughly 300 job cuts in 2016.
Many of those layoffs have been related to new businesses that GoPro has closed down over the past two years to streamline the business and refocus on hardware, such as when it closed its entertainment and content business.
GoPro will provide more detail on its 2017 results and 2018 outlook in its fourth quarter earnings report early next month. It will continue to provide service and support to Karma customers.