CES 2017 is in full swing and many tech companies are there showing off their new gear. Some are using the event and its concentration of journalists to explain what went wrong last year and what their plans are to make things right. GoPro Inc (NASDAQ:GPRO) is in the latter camp.
The company chose the Consumer Electronics Show to announce it will re-launch the GoPro Karma drone in 2017.
GoPro was one of the top tech news stories of 2016, but not in a good way. Seeking to diversify beyond action cameras, GPRO released the GoPro Karma, its first entry in the drone market. However the the Karma drone was a disaster from the start, despite an innovative folding design.
The release itself was months later than expected. And once the Karma drone was officially unveiled, DJI — the Chinese company that leads the consumer drone market — announced a compact folding drone of its own.
The DJI Mavic included a 4K camera while costing the same as the entry-level GoPro Karma (which did not include a camera), effectively undercutting its price by several hundred dollars. Adding insult to injury, the DJI Mavic was available before the GoPro Karma could hit store shelves.
Then things went from bad to worse for GPRO. The GoPro Karma drones it did sell starting in September began falling out of the sky. This forced the company to recall the Karma drone.
GPRO Stock Takes a Beating
Going into the holiday shopping season, GPRO was facing a PR issue with its recalled Karma drone. It had no drones to sell, leaving consumers looking for big-ticket, high-tech gifts to buy the DJI Mavic instead.
Following the Karma recall, the company was forced to lay off 200 employees (15% of its staff) and the company’s president left amid the restructuring. Earnings were missed — badly — and GoPro stock took a beating.
The company desperately needs some good news to kick off 2017.
GoPro Karma Will Re-Launch in 2017
Rather than demonstrate new products at the Consumer Electronics Show, GPRO is there “demonstrating recent product breakthroughs.” The biggest breakthrough of all for the company is a resolution to the Karma drone crisis.
GoPro chose CES 2017 to announce it will re-launch the Karma drone in 2017. According to GoPro, the issue that brought its drones out of the sky has been identified as “power loss due to a mechanical issue related to securing the drone’s battery.”
GoPro says it has fixed the design flaw and is currently finishing up testing. It says further details will be provided in February outlining the plans for the GoPro Karma worldwide re-launch.
2016 was not a great year for GPRO. Demand for action cameras softened even as additional competitors entered the market and smartphones began to emerge as a threat: Apple Inc. (NASDAQ:AAPL) released a water-resistant iPhone 7 that could shoot 4K video and 120 frames per second slow motion 1080p video. There were manufacturing challenges with its new Hero5 camera and the Karma drone recall capped things off. After the dust settled, GoPro stock shed over 50% of its value in 2016.
However, GPRO was able to sell the Karma Grip (handheld camera stabilizer) component of the Karma drone separately in time for Christmas, and the company reported GoPro camera sales up 35% on Black Friday compared to the previous year.
If it is able to successfully re-launch the GoPro Karma in 2017 it will have missed out on the 2016 holiday shopping season, but will have most of the year to build up sales and recognition leading into next Christmas.
Since announcing the Karma drone re-launch, GoPro stock is up over 2.5%, reflecting the possibility that the company is finally putting a terrible 2016 behind it.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.