GoPro had great 4Q results and 1Q guidance, but the market is skeptical, the stock was down over 10% the second day. So what happened? The COO is going away (mostly probably fired) and 1Q guidance is not beating consensus in the same epic proportion as 4Q14. COO’s exit is easy to explain, her background is being quickly overshadowed by the high-profile recruits in 2014. Anthony Bates, Jack Lazard, Peter Gotcher, Zander Lurie, all rock stars on paper, probably all very expensive. Anthony Bates, for example, owns over 520k GPRO shares, according to GPRO’s secondary offering filing.
I think GPRO today is like a kidult with bit of identity crisis. On the one hand, you have the marketing-oriented, headline-making, viral-video worthy company led by CEO Nick Woodman, and on other hand, you have a $6B-market-cap technology company led by managers and board members with deep experience in the tech industry and excellent track record. Today, over 50% of the company is still owned by the Woodman family. It seems that the kid side is still winning, based on GPRO’s new marketing campaigns (new videos like Life in 4K), more flashy in-store display, and overall a strong emphasis on social media and viral videos.
But 4Q earnings call gave us a good picture of the adult side of GPRO creeping up from the shadow of Nick Woodman. On the call, CFO (Jack) and President (Anthony) are making an effort to reset the expectation of investors in two ways: 1) making it very clear that monetization is not a priority for its media content strategy, and 2) 1Q guidance tells Wall Street that its expectation is too high and they should reconsider their margin and growth outlook for 2015.
2015 is a critical year for GoPro. It is a year the company should rebuild itself from the ground up. It desperately needs a new camera that can differentiate itself from competition without much of the prior issues (overheating, short battery life). It also needs to revamp its in-camera software, its smartphone app, and its editing software. If GoPro cannot outdo itself in 2015, competition and the shrinking market of digital camera/camcorder will quickly reduced its growth to low double digit, or even to zero. The biggest risk in the company for 2015 is the lack of clarity in strategy. GoPro never puts product as its top priority. It want to facilitate great video experience of its users, and yet it is lacking so much experience in software and services. The media strategy sounds good initially for investors, but it was truly getting ahead of itself when it announced and then stressed it. As a consumer electronics company, it needs to put product first, then improve the total experience around the hardware. GoPro today, is the opposite of successful hardware companies like Apple.
GPRO's CEO is not stupid, he knows that he needs help from bigger guys to elevate the company to the next level. And yet founders don’t always make good CEOs, the desire for control is quite hard to resist, which may be detrimental in making critical and time sensitive decisions. For consumer electronics, product and timing is everything. GPRO’s past glory is a clear example of nailing these two factors. But the GPRO today is beginning to lose control of both. For GPRO to succeed going forward, the CEO’s skill set looks a bit unfitting and he is probably more suitable for a CMO and advisor/evangelist role.
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