(Reuters) - GoPro Inc (GPRO.O) estimated fourth-quarter revenue below market expectations due to disappointing sales of its action cameras, and said it would cut 7 percent of its workforce, sending its shares into freefall.
GoPro shares plunged 28 percent to $10.50 in extended trading, or less than half its 2014 IPO price of $24.
Traders told Reuters that they had expected a revenue miss in the holiday quarter, but not of this magnitude, adding that this does not bode well for 2016.
The San Mateo, California-based company said it expects revenue of about $435 million for the fourth quarter, well below analysts’ average estimate of $511.9 million, according to Thomson Reuters I/B/E/S.
The company, which had about 1,500 employees at the end of 2015, said quarterly revenue was also hit by a price cut meant to boost demand for its Hero4 Session cameras.
Chief Executive Nicholas Woodman said in October that weaker-than-expected demand for the Hero4 Session camera was due to its initial high price and fewer marketing campaigns.
It also faces competition from China’s Xiaomi [XTC.UL], which offers cheaper alternatives. Citigroup said in December that a recovery in sales of the Hero4 Session looked increasingly unlikely. The brokerage also said the device could end up cannibalizing demand for GoPro’s more expensive wearable cameras.
“The company made a mistake by not introducing the Hero 5 camera series ... Once they start selling the Hero 5 cameras, they will bounce back,” said FBN Securities analyst Shebly Seyrafi. Influential short-seller Citron Research had named GoPro as the short of 2015.
GoPro said on Wednesday that it expects to incur a restructuring charge of about $5 million to $10 million in the first quarter, most of which is related to severance costs.
“They now internally believe that they are not going to grow as fast in the future as they were before” Seyrafi added.
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 last year, following the death of CEO David Goldberg.
Lurie will replace current CEO Bill Veghte, effective Jan. 16.
Ambarella Inc (AMBA.O), which provides chips used in GoPro’s cameras, fell 8.5 percent in after-market trading.
GoPro will report results for the fourth quarter and full year on Feb. 3.
Reporting by Anya George Tharakan in Bengaluru and Lance Tupper in New York; editing by Don Sebastian and G Crosse