GoPro stock tumbles after weak camera sales

(GPRO) plunged nearly 25% in after-hours trading on Wednesday after the company’s fourth revenue estimation is below analysts’ expectations. Putting those two pieces together, you could conclude that sales weakness came in the first half of the quarter and that stronger sales came in the second half once the holiday shopping season rolled around but that feels like a reach.

The San Mateo, California, company said that it will cut about 7 per cent of its workforce, or about 100 jobs.

The Silicon Valley-based company said its sales were also hit by a decision to cut the price of its Hero4 Session camera.

Non-GAAP gross margin for the fourth quarter of 2015 is anticipated to be around 35 percent whilst non-GAAP operating expenses are estimated to be between $150 million and $152.5 million. The company lowered the price of its new Hero4 Session camera after saying it made the product too expensive, which reduced its fourth-quarter revenue by $21 million.

The company is facing stiff competition from China’s Xiaomi, which is offering cheaper alternatives to GoPro’s cameras.

GoPro is to release its official earnings figures for a year ago on February 3. The new forecast means revenue dropped about 31 percent from the fourth quarter of 2014.

The company also said Zander Lurie has been named to GoPro’s board and has resigned as senior vice-president of GoPro Entertainment.

Lurie has been named as chief executive at online survey startup SurveyMonkey, where he had served as temporary executive chairman past year, following the death of CEO David Goldberg.

GoPro’s shares have been battered in recent months amid concerns that the wearable-camera market is drying up.

GoPro said it would book a charge of up to $5 million in its current quarter to cover severance costs related to the job cuts.

The weak outlook from GoPro dragged down shares of Ambarella Inc., the company that makes image-processing chips for GoPro cameras.

Shares of Ambarella were off 11% at $39.75 in after-hours trading.