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GoPro cutting 15 percent of workforce, shuts down entertainment unit

This undated product image released by GoPro shows the GoPro digital camera, which has become a hot item on ski slopes and other settings. (AP)
By Selina Wang Bloomberg
This undated product image released by GoPro shows the GoPro digital camera, which has become a hot item on ski slopes and other settings. (AP)

GoPro Inc., struggling to get traction with its new action-camera and drone, said it will eliminate about 15 percent of its workforce and shut down its entertainment division to reduce costs.

The company, which isn’t profitable, will cut more than 200 full-time positions, according to a company statement Wednesday. Tony Bates, who joined as GoPro’s President in June 2014, is stepping down by the end of the year. He was previously an executive vice president at Microsoft Corp. and the chief executive officer of Skype Technologies.

The closing of the entertainment division is a signal that the company is finally narrowing its vision. Wall Street has long been skeptical about GoPro’s plans to build a media company around its action-packed GoPro videos online.

“Consumer demand for GoPro is solid and we’ve sharply narrowed our focus to concentrate on our core business,” said Chief Executive Officer Nicholas Woodman in the statement.

GoPro said the restructuring will reduce operating expenses to about $650 million in 2017 and achieve its goal of returning to profitability next year. The company estimates it will incur as much as $33 million in restructuring costs.

GoPro had been banking on its most-recent cube-shaped camera model, the Hero5, and its Karma drone, released in October, to revive growth and a stock price that has plummeted more than 50 percent over the past year. So far those products failed to be the hits that management had been expecting and earlier this month GoPro lowered forecasts for full-year sales as third-quarter revenue came in lower than analysts’ average estimates.

The company blamed the disappointing results on production problems. A week later, GoPro had to recall about 2,500 drones, a move that may hurt GoPro’s aims for a return to profitability in the fourth quarter. The company still hasn’t said whether Karma shipments have resumed.

It also faces a class action lawsuit that claims the company violated federal securities law by making false and misleading statements about the drone. The complaints include allegations that GoPro knowingly overstated the capabilities of the drone and consumer demand for the product.

Shebly Seyrafi, an analyst at FBN Securities, is lowering his forecast for 2017 revenue from the Karma to $36 million from $150 million, he wrote in a note Tuesday.

After being a one-time tech darling, San Mateo, California-based GoPro is now facing rising competition from Apple and even Snap Inc., whose camera glasses are also promising a seamless experience from capturing adventure film to posting on social media. In drones, GoPro is up against the dominant player, Chinese manufacturer SZ DJI Technology Co., who also released a new model just a week after GoPro.