GoPro finally realizes that smartphones can do exactly what its cameras can
The action-camera maker is striving to return to profitability, and on Wednesday announced its third round of layoffs in just over a year.
GoPro cut 270 full-time and open positions in the latest round. Last November, it laid off 200 people, or about 15% of its workforce, and reduced its headcount by 100 people in January.
In an interview with CNBC on Thursday, CEO Nick Woodman said the company had realized one crucial error it made since it went public in 2014.
"We failed to make GoPro contemporary and failed to align GoPro to the smartphone movement," Woodman said. "The smartphone has set a new bar for convenience" and for how much work consumers are willing to put into making video, he added.
GoPro largely achieved the brand recognition of being the catch-all moniker for small point-of-view cameras. "We believe that there's a mega trend of consumers who are increasingly sharing themselves online," Woodman said.
However, GoPro faced a tough ask getting consumers with smartphones to buy an additional camera. In addition, GoPro's niche was getting crowded with cheaper models. GoPro's flagship device, the Hero5 Black, retails for $399.99 excluding any mounts or harnesses needed to use it handsfree.
GoPro has also struggled with new product launches. To the dismay of some analysts, the company cut the price of its tiny Hero4 Session camera by $100 to $299 within three months of its launch in 2015. At the time, Morgan Stanley's James Faucette and his team said in a note that consumers preferred the preceding model's better video quality over the Session's form factor.
The company entered the drone market last September but quickly recalled about 2,500 units of the Karma after some of them lost power mid-flight. The Karma went back on sale in February.
Achieving profitability
Amid these challenges, GoPro shares have fallen 76% from their 2014 IPO. Traders cheered news of the latest cost cuts, sending the stock up nearly 15% to $8.53 a share on Thursday.
However, Morgan Stanley analysts said there was room for deeper cost cuts.
"While we are encouraged by further cost cutting, we are not convinced GoPro can achieve profitability this year yet," said Morgan Stanley's Jerry Liu and his colleagues in a note on Wednesday.
They raised their price target on GoPro shares from $7 to $7.50, but maintained their "underweight" rating. Liu said they were encouraged by the cost cuts, and what CJ Prober, the chief operating officer, described as a shift from focusing on growth to costs.
GoPro estimated restructuring charges of up to $10 million in the latest round of layoffs, mostly related to severance costs. It raised its revenue guidance for the first quarter of 2017.