Published: Tue, January 09, 2018
Markets | By Noel Gibbs

GoPro cuts 20 percent of jobs, exits drone business on lower revenue

GoPro cuts 20 percent of jobs, exits drone business on lower revenue

GoPro's shares recovered somewhat after the news of the possible sale, down 11.30% to $6.67 in mid-day trading on Monday.

However, prices rebounded sharply following a report from CNBC that the company has hired JPMorgan to find a buyer. GoPro said that helped boost sales.

"It is our responsibility to scale the business, so if the right opportunity presented itself, it's something we would consider", it added.

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Sport-camera maker GoPro confirmed Monday it will slash at least 20 percent of its workforce and drop its Karma drone business as it restructures operations.

The company has suffered a decline in demand for its eponymous cameras and Karma drones - mostly used by sports junkies and travel enthusiasts - for several quarters. GoPro also cut some 200 positions in November of 2016.

"These factors make the aerial market untenable and GoPro will exit the market after selling its remaining Karma inventory", said the company.

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The company was already forced to announce a price cut on December 10 for its core camera product, the HERO5, due to weak pre-holiday sales.

In its statement today, GoPro also cited the hard regulatory regimes in the USA and Europe as the reason why it doesn't think the drone market will be lucrative in the long term. The job cuts and business restructuring will result in an estimated charge of $23 to $33 million, most of which will be recognized in the first quarter, the company said. Only a few weeks after its release, GoPro issued a mass recall of 2,500 units because faulty engineering caused the drones to lose power mid-flight and drop out of the sky.

"Cutting costs is a good move, although now it's about if the company can turn this ship around themselves", Daniel Ives, analyst at GBH Insights, said.

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The company has lowered the guidance for its next-quarter earnings, and founder and CEO Nick Woodman has reduced his salary to $1 for 2018, according to the statement, although other non-cash compensation remains.

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