The consumer hardware market has proved difficult for start-ups to survive, even among the once-high-profile star companies. Fitbit (FIT), for example, has recently been acquired by Google (GOOG). The next big one is GoPro.
GoPro has been struggling since its launch. Product strategy and business strategy errors, loss of performance, resulting in the company’s financial situation into a dangerous situation. GoPro’s new HERO8 Black and Max 360 cameras are exciting this Christmas shopping season, but GoPro has a long way to go to make a profit.
Before you get into a disaster and a bleak ending, it’s time to find a buyer to sell. The most likely acquisition spree is Apple (265.76, 3.12, 1.19%) (AAPL).
We’ve found that GoPro’s revenue growth has stalled over the past few years, falling all the way from its peak in 2015.
GoPro’s financial position has recently shown signs of deterioration. Third-quarter loss was $74.8 million, a significant increase from the same period last year.
For GoPro, the holiday spending season is the most critical of the year, and so is this year. However, production delays for hero8 Black and Max 360 cameras meant it didn’t go on sale until October. Past experience has shown that sales in the general holiday season have been disappointing when there have been delivery delays in the past.
GoPro is now counting on the holiday spending season to reverse, but this has happened before. However, the company’s execution was too poor to expand its product line, and GoPro is likely to be less aggressive this time. GoPro is no longer what investors used to think of as a growth stock.
Why is Apple the best buyer?
While GoPro is struggling, its product line complements Apple’s.
First, Apple is moving from an iPhone-centric business model to diversifying to develop more wearables that don’t contain built-in cameras. In the future, Apple could offer GoPros to customers, just as they now sell Beats headphones.
Apple can also add a number of new features to GoPro.
Apple is also one of the largest cloud service providers, and GoPro is increasingly relying on GoPro Plus cloud service subscriptions for revenue. This can be packaged into iCloud for a win-win situation.
Finally, editing and sharing photos taken with a GoPro camera is a very important feature, but GoPro is not very strong in photo editing software development. Apple can easily solve this problem. GoPro can use Apple’s app to share freely on the iOS platform.
Apple is buying GoPro now, just as it did with Beats in 2014, and GoPro’s products can complement Apple, while Apple can make GoPro’s hardware better and, most importantly, GoPro’s growing service business aligns with Apple’s strategic goals.
GoPro is now worth about $725 million, so Apple could buy GoPro for about $1 billion. The money is a for Apple. But the introduction of non-iPhone cameras is a good complement to Apple’s increased investment in wearables. For GoPro, Apple’s acquisition could save a struggling business in time.