GoPro Makes Last-Gasp Effort to Grow Sales
GoPro (NASDAQ: GPRO) has been trying to save itself for more than two years, throwing everything it can at the wall from drones to 360 cameras to discounts for existing products. Nothing seems to be working and, the stock is near all-time lows as a result.
The latest attempts to improve GoPro's finances feel more like last-ditch efforts than well-crafted strategy moves. Here's why licensing and low-cost cameras may show how desperate GoPro is right now.
A self-driving GoPro?
Last week, GoPro announced a partnership with Jabil Inc., (NYSE: JBL), the company's camera manufacturer, to license GoPro's technology for third-party products. GoPro's release announcing the partnership said this:
This deal could allow companies to use GoPro technology and take advantage of Jabil's manufacturing, and GoPro's approval as part of the deal ensures it won't be enabling direct competitors. In theory, leveraging GoPro's R&D to get it into other products could be a good idea. But we have no idea whether third parties will want to adopt the technology, or if the size of any sales will be worth the risk that competitors will take GoPro's intellectual property (remember, China isn't great at protecting IP).
On a financial front, the deal should be an incremental positive for GoPro. We don't know if customers will want to buy products with its technology, but if they do it will be high-margin sales, something GoPro desperately needs right now.
Are the rumors true?
Tech Radar is reporting that GoPro is eyeing the release of a low-cost GoPro Hero camera based on the physical characteristics of the Black line of products. It would have a price below $200 and may replace the Session line that's struggled to gain traction in the market.
GoPro has always struggled at the lower end of the market to make a product that's both compelling from a technology standpoint and better than simply using a smartphone. But the company doesn't want to make its low-end camera so good that it takes sales away from the Hero6 Black at $399.99.
As GoPro struggles with both sales volume and gross margin, it's a dangerous move to introduce a compelling low-price camera option. It could reduce the average sale price for GoPro cameras and reduce overall gross profit, making it even harder to make a profit. If the rumors are true, that may be exactly what GoPro is doing.
No easy answers
There isn't an easy way out of GoPro's current rut -- and the licensing deal and potentially low-cost camera seem to show that management doesn't know quite what to do. The company burned tens of millions on the Karma drone in an effort to expand beyond action cameras, but that didn't work, and now the growth opportunities seem limited. Maybe self-driving cars will one day have GoPro's tech inside them, but I'm skeptical that will be the case until the company proves otherwise.
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Travis Hoium has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends GoPro. The Motley Fool has a disclosure policy.