GoPro shares rose the most in almost a year this week, after the action-camera maker unveiled a second round of job cuts that get it closer to an elusive goal of making a profit.
Shares jumped 13 per cent to US$8.29 yesterday after earlier surging as much as 18 per cent. The company said on Thursday that it will eliminate about 270 full-time and open positions. In November, it chopped 15 per cent of its workforce and shut down its entertainment division. GoPro had 1552 employees at the end of 2016, according to a regulatory filing.
Revenue stabilisation and the second round of job cuts means GoPro is likely to become profitable this year, rather than in 2019, reducing the chance it will have to tap its credit facility, said Citigroup Global Markets analyst Stanley Kovler.
The news should "stave off the bear scenario for a few quarters," he added, raising his rating on the stock to neutral from sell.
Brad Erickson, an analyst at Pacific Crest Securities said GoPro's announcements were probably aimed at short-sellers, or investors who are betting against the company. Cost cuts preserve significantly more cash than previously expected but raise questions about GoPro's ability to create compelling new products, he said.
GoPro, founded and led by chief executive Nick Woodman, has gone from a high-flying gadget maker with digital media potential to a bloated company being undercut by cheaper Asian rivals. It reported disappointing earnings last quarter, was forced to recall its Karma drone in November, and was hit with production delays that dented sales.
Chief operating officer CJ Prober vowed to keep costs in check, make GoPro cameras easier to use, and chase international growth.
"We're trying to do fewer things better," Prober said in an interview. "We went team by team and did detailed budget and organisational reviews. That fed into a series of decisions that let us get to that operating expenses number."
Roles were cut throughout the organisation, he said. The company is ridding itself of "distractions," like the entertainment unit, and tightening team structures, he added. GoPro shrank its video production team to focus more on user-generated content and less on GoPro-created videos. The San Mateo, California-based company also merged teams internationally where there were duplicate roles across regions. Prober said the cuts will not impact the company's product road map.
The latest cuts are expected to reduce full-year adjusted operating expenses to less than US$495 million ($709m). That's about 18 per cent below the company's previous projection of US$600m.
Although the stock's jump on Thursday was the biggest intraday gain since April 2016, it is still down more than 60 per cent from its 2014 initial public offering price.