As a result of holiday price cuts, action camera maker GoPro Inc. (GPRO, Financial) lowered its fourth-quarter 2017 guidance on Monday and announced a workforce reduction.
The California-based company now expects quarterly revenue to be approximately $340 million, which is up slightly from $330 million in the prior quarter but below the previous guidance of $470 million.
GoPro said price cuts for several of its products impacted revenue for the quarter. The company slashed prices for its Hero5 Black camera in December after experiencing “soft demand.”
"Despite significant marketing support, we found consumers were reluctant to purchase HERO5 Black at the same price it launched at one year earlier,” GoPro founder and CEO Nicholas Woodman said. “Our December 10 holiday price reduction provided a sharp increase in sell-through."
On Jan. 7, the company also lowered the price of its Hero6 Black by $100.
In order to reduce operating expenses by approximately $80 million in 2018, GoPro laid out several strategic initiatives, one of which is trimming its global workforce. The company said it plans to lay off 20% of its employees.
The company also revealed it is exiting the drone business, thereby ending sales of its Karma drone. GoPro cited intense competition and future regulation as the main factors behind this decision.
In addition, Woodman is reducing his cash compensation for the year to $1.
"GoPro is committed to turning our business around in 2018," Woodman said. "We entered the new year with strong sell-through and are excited with our hardware and software roadmap. We expect that going forward, our roadmap coupled with a lower operating expense model will enable GoPro to return to profitability and growth in the second half of 2018."
Following the announcement, the company’s shares, which closed at $7.52 on Friday, fell 27% in premarket trading before halting. According to GuruFocus, the stock declined approximately 15% in 2017.
GoPro will report its final earnings numbers for the fourth quarter in February.
Disclosure: I do not own any stocks mentioned.
