Amazon, Apple, Google, Sony and Snap have all been rumored as possible suiters to acquire GoPro over the years, now each of these tech giants will be applauding their decisions to hold out, as the camera maker reported it will miss earnings expectations and slash its work force by 20% to under 1,000.
There is little point in slating GoPro’s product line, having produced an excellent portfolio of cameras and a brand that no other manufacturer on the market has been able to match. GoPro has become the adrenaline-junkie’s best friend and is adorned by racing cars and airplanes to record action scenes the likes of which had never been seen prior to the birth of the GoPro camera. The unfortunate news is simply another case of a hardware company falling victim to a society where any device other than the smartphone is considered background noise.
An iPhone X owner is unlikely to strap their beloved device to their chest during a sky dive, for example, but as consumers pay increasing amounts for the latest handsets, they have in turn become reluctant to shell out more for additional devices – while GoPro hasn’t helped itself by deciding to persist with its high-end price points.
However, the opposite is true for GoPro in the VR market, where the company has managed to gain significant market share among content creators due to its cameras being cheaper than the serious studio spec VR cameras. VR may therefore be a market GoPro will increase focus on in the future, otherwise it would be a big blow for budding content creators in the space – particularly after Nokia shelved its Ozo VR cameras last year.
GoPro warned that fourth quarter 2017 revenue will come in at $132 million below the previously projected $472 million for the quarter. The company blames poor sales performance of its Hero5 Black cameras, as consumers were reportedly unwilling to pay the $500 price tag, the same as the previous year, according to GoPro. It soon reduced the price of Hero5 cameras to $399.99 and also dropped its newly released Hero6 cameras from $499 to $399; in a case of too little, too late. However, GoPro said its new spherical Fusion camera saw better uptake than expected.
Shortly after GoPro’s IPO in mid-2014, the company was valued at $10.4 billion, some seven times revenue at the time, but this soon plummeted to about $2.46 billion in early 2015. Today, its market cap has fallen further to $957.5 million, which jumped following news that GoPro has employed the helping hand of JP Morgan to find it a suitable buyer.
A knock-on implication of the demise of GoPro worth mentioning is that of its chip suppliers. Application-specific integrated circuit (ASIC) vendor Ambarella, a company that built video processing systems primarily to encode video inside cameras, was seen to be behind GoPro in its core market, but last year GoPro said it would be switching out Ambarella chips, with no replacement announced. GoPro is also canning its drone division as part of the restructuring process, a venture it only entered in late 2016.
GoPro founder and CEO Nicholas Woodman, whose pay is being reduced to $1, said, “Despite significant marketing support, we found consumers were reluctant to purchase Hero5 Black at the same price it launched at one year earlier. GoPro is committed to turning our business around in 2018. We entered the new year with strong sell-through and are excited with our hardware and software roadmap. We expect that going forward, our roadmap coupled with a lower operating expense model will enable GoPro to return to profitability and growth in the second half of 2018.”
An acquisition looks almost an inevitability now for GoPro, a move we feel more suits a major overseas technology giant such as Samsung or even Alibaba, rather than one of the US tech titans. Its hardcore user base will be hoping a takeover would involve the GoPro brand continuing as a separate entity, but at the current run rate, its technology could end up being swallowed into an existing product line.
GoPro could then eventually become a pure video editing software business within a much larger beast, using assets from Stupeflix and Vemory, two video editing tools start-ups it acquired in March 2016 for a combined $105 million.