Karma Fallout Continues: The Latest Bad News for GoPro

The bad news following the disastrous recall of GoPro’s long-awaited Karma drone continues.  GoPro announced on Wednesday that it will cut 15% of it’s staff in a major company restructuring.  The company plans to close it’s entertainment division, reduce office space, cut more than 200 full time employees, and implement a total freeze on hiring.

The restructuring also includes changes at the top: GoPro president Tony Bates, who joined the company in 2014, will leave at the end of the year.

While the news was bad for GoPro’s workforce, investors reacted well to the announcement.  GoPro’s shares, which have plummeted over the last year, rose 4% (to $10.22) in pre-market trading.

The news follows a terrible year of setbacks and poor results for the company.  The camera maker, specializing in action cameras widely used for sports and entertainment, attempted to branch out from its core product line due to lagging sales.  GoPro planned to utilize user footage and develop original content to become a media company, hiring key people from large media names like HBO and MTV; but the closure of that division indicates the idea was a failure.

The highly anticipated Karma drone, a consumer camera drone, was also hailed by GoPro as a significant new revenue source that would revive the company’s failing fortunes.  But the drone was recalled less than a month after release after users complained that power failures caused the drone to drop out of the sky.  The recall prompted a class-action investor lawsuit against the company, claiming that GoPro exaggerated the potential for the product and failed to notify investors of the risks.

 

 

The restructuring efforts are part of GoPro’s promise that they will return to profitability next year.  “We have a lot of work to do to finish the quarter and our fiscal year,” said CEO Nick Woodman in prepared remarks, claiming: “we are headed into 2017 with a powerful global brand, our best ever products, and a clear roadmap for restored growth and profitability in 2017.”

GoPro also stated that Black Friday camera sales improved 35% year-over-year at major retailers, and Cyber Monday sales from GoPro’s website were also up more than 30%.