GoPro: Too Focused – WSJ

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To the thousands of gadget makers flocking to Las Vegas this week, let

GoPro


GPRO -12.77%

serve as a cautionary tale.

The action camera maker deserves credit for creating a market for a new type of device when cheaper and more convenient alternatives abounded. In its best year to date, GoPro sold more than 6.5 million cameras as

Apple
Inc.

was selling its mega-popular iPhone 6, which featured a strong camera in its own right. GoPro successfully tapped into the ethos of the Instagram generation to find a segment of the population willing to pay up for high-quality, hair-raising footage.

That alone sets GoPro apart from many of the aspirants hocking new devices at the CES technology show this week. But it isn’t proving to be enough. GoPro warned Monday that fourth-quarter revenue will come in around $340 million, which is about 28% below the $470 million it had previously projected. The company blamed weak sales of its Hero5 camera in particular, which it says improved following a price cut late in the quarter. It also noted that its newest device, the Hero6, sold “as expected,” which doesn’t sound great for a device intended to anchor its lineup until later this year.

GoPro also said it would ground its drone efforts for good, effectively leaving investors with a stand-alone camera company that has struggled to execute its plans. Monday’s announcements at one point sent the stock down 20% to a record low of around $6 before CNBC reported that GoPro engaged JPMorgan Chase to help it find a buyer. The company later clarified that while it remains open to the possibility, there is no active engagement to sell.

It is a tired idiom that “hardware is hard.” GoPro’s real problem is that, even when its cameras sell well, it is a difficult business on which to sustain a publicly traded company. Cameras that sell for $400-$500 a pop appeal to a relatively small segment of the population who still may not upgrade every year.

The lesson for device makers pondering their own futures is to settle the diversification question sooner than later. Roku, a maker of streaming media players, has proven to be a hit with investors thanks in large part to its success at building out a platform business that now makes up close to half its total revenue, lessening its dependence on hardware sales. GoPro’s camera business wasn’t a flash in the pan, but investors still prefer to zoom out.

Write to Dan Gallagher at dan.gallagher@wsj.com

Appeared in the January 9, 2018, print edition as ‘Battered GoPro Is Too Focused.’



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