GoPro Inc. will cut more than 200 full-time positions and close its entertainment division in a company-wide restructuring that comes as the San Mateo firm struggles to establish itself as more than just an action camera maker.
GoPro said Wednesday it will cut back on its facilities and cancel open job positions, potentially saving the company more than $100 million a year, according to analysts. In addition, GoPro President Tony Bates will leave the company at the end of the year.
The company says the restructuring, which cuts its workforce by 15%, could cost as much as $33 million, including severance, stock options and office consolidation. It did not say in its statement who would replace Bates or assume his responsibilities. Requests for comment were not returned.
GoPro emerged as a Silicon Valley darling ahead of its 2014 initial public offering thanks to what was once a unique line of products: durable cameras that could record, and withstand, the rigors of extreme sports.
With tech world buzz and extreme sports cache from high-profile endorsement deals with athletes including Olympic snowboarder Shaun White, GoPro surged more than 30% in its first day of trading on the Nasdaq Stock Market, closing at $31.34. That closing price put the market value of the company at almost $4 billion.
"They invented a category," Michael Pachter, research analyst at Wedbush Securities, said of GoPro's niche in extreme sports motion capture.
But for investors, that wasn't enough.
"People thought … everyone will want one. Competition came in, sales started to slow, and I think investors concluded everybody doesn't want one," Pachter said.
As smartphone cameras improved, GoPro planned to bolster revenue, in part, by branching out and becoming more than just a hardware company. Shortly before its IPO, the company announced it had hired Bates, a former Microsoft executive and chief executive of Skype, as president to oversee the company's media strategy. It intended to create a hub for exciting, professionally produced content filmed on GoPro equipment.
"GoPro programming has developed a dedicated and growing audience," the firm said in its IPO filing. "We believe GoPro is well-positioned to become the first media company whose content is captured exclusively using its own hardware."
But the company's attempts to create a YouTube for adrenaline junkies wound up falling flat.
Although building an advertising business around extreme sports videos seemed like a logical extension for GoPro, analysts said the company underestimated the interest in user-generated videos compared with the professionally produced content favored by the firm.
Extreme sports athletes and their other sponsors were already making their own videos that rendered GoPro's content redundant. And those kinds of videos already had a home on Facebook and YouTube, where viewers were already in the habit of finding them.
"GoPro never clearly articulated how they intended to monetize," Pachter said. "Here we are a couple years later, and they haven't really generated any revenue from it."
In September, the company tried to move into the consumer drone market and unveiled the Karma, a compact drone that could carry a GoPro camera and record rugged adventures from the air.
The drone went on sale in October, but this month, the company recalled the 2,500 Karmas it had sold after reports that a small number of them lost power during operation.
GoPro did not mention the drone in its Wednesday statement, but analysts said the drone has to be part of the company's long-term road map to help increase revenue.
During an analyst call this month, Bates said the company planned to focus on its "key core product line" — its camera, associated software and "aerial," a likely reference to GoPro's Karma drone.
"It's a natural product for them to offer," said Joe Wittine, senior equity research analyst at Longbow Research. "They'll carve out a little share of the market based on the GoPro brand if they can get the technology right and get the product into consumers' hands."
On Wednesday, the company reported that sales of its cameras from Thanksgiving through Cyber Monday on GoPro.com had increased about 33% compared with a year earlier. Camera sales at retail stores during this period were up more than 35%, compared with the same period last year.
To turn things around, the company must continue to improve its core camera products and add new features to encourage sales, analysts said. The Hero5 waterproof camera is GoPro's first upgrade to its traditional product since its predecessor's release in 2014.
"They're already excellent products," Wittine said. "But what's next?"
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1:45 p.m.: This article was updated with analysts' comments and additional context about GoPro.