Earlier this week, GoPro revealed its plans to restructure the business for 2017. Over the past few years, GoPro has been expanding its market by dabbling in the media operations business in an effort to further promote its core model as a camera company. They hired Tony Bates, former owner and founder of Skype, as the President of GoPro and since have landed deals with Red Bull as the sole provider of POV images for any events conducted by the energy drink tycoons.
Now, GoPro intends to cut its media operations in order to focus primarily on their main business as a camera company. This will drop their operating costs substantially from about $735 million down to $650 million by cutting 15% of GoPro’s 1,700 total jobs including President Tony Bates.
“My time at GoPro has been an incredible experience. In the past three years, GoPro has seen enormous progress in camera technology, software and international growth. Today GoPro has a solid leadership team deeply focused on its core business and profitability.”
–Tony Bates, President of GoPro
However, due to existing contracts, severance packages will cost the company up to $18 million and an additional $15 million for other stock related compensations and depreciation from office consolidations. This $33 million restructuring charge will be part of the forth quarter costs in 2016.
Nevertheless, there is good reasoning behind GoPro’s updated approach to their business. Because of the addition of their media operations, GoPro has posted the last four quarters as losses with third-quarter revenue dropping 40% compared to last year. Their camera business on the other hand is gaining momentum even though GoPro projected a weak holiday season due to production errors. Black Friday sales were up 35% from last year, which is good news as half of GoPro’s profit comes from the holiday season.
“Consumer demand for GoPro is solid and we’ve sharply narrowed our focus to concentrate on our core business. 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,”
–Nicholas Woodman, Founder and CEO of GoPro.
Unfortunately, GoPro still believes that an increase in holiday sales will not amend the losses stemmed from this past year and suspect 2017 to continue in the red. Even more distressing is the fact that over 200 people will be out of jobs during the most stressful time of year.