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Not Even This High-Profile Poach From Apple Can Save GoPro, Inc.

By Evan Niu, CFA - Apr 13, 2016 at 4:00PM

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Scoring a major industrial designer can't fix what's wrong with GoPro.

Image source: GoPro.

GoPro (GPRO -1.92%) shares have popped today on reports that the company has successfully poached a high-level industrial designer, Danny Coster, from Apple (AAPL -2.46%). Coster spent over a decade at the Mac maker, helping to design many of its flagship products, and will join GoPro as vice president of design.

While the hiring is certainly a positive storyline for GoPro and a negative one for Apple, I think investors are overreacting to the news. Or perhaps there's some short covering, too, since GoPro has a fairly high short interest of 30%.

Why did Coster leave?
The pressure of working at Apple was evidently weighing on Coster, with the designer even calling it "daunting" at times in a recent interview with Stuff. Coster said he wanted to spend more time with friends and family while exploring this "new opportunity" at GoPro.

This isn't the first time that investors have heard of a high-level Apple executive leaving for personal reasons. Tony Fadell, often referred to as the father of the iPod, left many years ago in part due to wanting to spend more time with his family (his wife also worked at Apple at the time). Fadell once recalled a time when his oldest toddler preferred to be comforted by the nanny instead of his parents, which served as a wake-up call for Fadell.

Apple is famously demanding of its employees, but sometimes it can be too much.

Why GoPro is still stuck
Coster is a very talented industrial designer with oodles of credentials, including hundreds of design patents and numerous utility patents. He will undoubtedly bolster GoPro's hardware team and help design higher-quality products. But the issue is that those have never been GoPro's biggest weaknesses, which are still largely unaddressed.

GoPro's fall from grace was predicated on saturation within the niche market of action camera enthusiasts, and the realization that GoPro had very little mainstream market potential with the average consumer. Combined with a few product missteps and strategic pricing errors, GoPro's inability thus far to diversify its business beyond hardware is why the company crashed from sky-high valuations.

Having an Apple designer help create the thinnest and lightest action camera that GoPro has ever made is very unlikely to spur some massive upgrade or adoption cycle.

But at what cost?
I'd also be concerned with how much the hire will cost GoPro. Presumably, Coster will cost a pretty penny, and we all know that GoPro's preferred method of compensation is excessive equity grants. Meanwhile, the share repurchase program merely offsets the related dilution at best and effectively only enriches insiders.

Total stock-based compensation was $80.7 million last year, which was over twice the $36.1 million in net income that shareholders had to divvy up between themselves ($0.25 per share). Coster's hiring won't help GoPro get back on track because even though Coster is a major score, he can't help GoPro address its biggest problems.

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Stocks Mentioned

GoPro, Inc. Stock Quote
GoPro, Inc.
$6.66 (-1.92%) $0.13
Apple Inc. Stock Quote
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