Markets

GoPro stock jumps on news company is seeking a sale

GoPro stock jumps on news company is seeking a sale

GoPro announced Monday it would eliminate its Karma drone business and lay off 20 percent of its workforce.

The company will achieve this lower operating expense level by; reducing its global workforce from 1'254 employees as of September 30, 2017 to fewer than 1'000 employees worldwide.

GoPro also announced the Karma drone will be a one-and-done effort with no further products to follow.

"As we noted in our November earnings call, at the start of the holiday quarter we saw soft demand for our HERO5 Black camera", GoPro founder and CEO, Nicholas Woodman, says in the press release.

GoPro's decision to exit the drone business was driven by what the company views as a "hostile regulatory environment in Europe and the United States" that will make the aerial make "untenable" going forward.

Shares of GoPro plunged 23 percent in morning trading Monday on the news. Although the FAA has a robust regulatory regime in place in the U.S. that allows for the easy use of small drones like the Karma, ongoing changes to laws, especially in Europe, make things uncertain for GoPro.

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Trying to access the drone market proved to much for GoPro.

Preliminary results show the company had fourth quarter revenue of $340 million, down $200 million, or 37 percent from what it reported in the fourth quarter a year earlier. However, the company had to recall all units in November a year ago due to a battery issue that caused its drones to just fall out of the sky.

"GoPro is committed to turning our business around in 2018", Woodman said in the statement.

Morgan Stanley said in a research note earlier Monday that the price cut for the Hero6 camera would make earnings growth hard in fiscal 2018.

The company also said that Woodman's compensation would drop to $1 during 2018 as it attempts to become profitable in the second half of the year.

GoPro promised continued support for existing Karma drones.

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