Source: GoPro.
In a rare defection, tech giant Apple's (AAPL -2.41%) industrial design team is now one person lighter. As reported by The Information earlier this week, Apple designer Danny Coster jumped ship from Cupertino to run the design operations of struggling action-camera maker GoPro (GPRO -1.82%).
Adding a designer from one of the world's most esteemed mass-market design operations is indeed a coup for GoPro, one that could have a very positive influence on future products. However, given GoPro stock's 19% spike on news of the hiring, investors should also realize that the company's problems run far deeper than the powers of a single Apple designer.
A rare defection
The move comes as a genuine win for GoPro, which needs a bit of positive news as badly as a company can these days. The company, facing a range of issues, finds its stock today down more than 50% from its frothy IPO pricing in 2014.
In Coster, GoPro and its CEO Nick Woodman have secured someone whose fingerprints are featured prominently throughout many of Apple's most-popular products during the past two decades, including the iPhone. According to the GoPro press release, Coster will help lead design across the company's hardware and software initiatives.
Source: GoPro.
At the same time, it isn't clear whether, or to what degree, Coster's departure will affect Apple's in-house design team. Media portrayals typically depict the group as small and relatively tight-knit, with notably low turnover. As such, it's unclear whether Coster's decision to leave Apple reflects any kind of uneasiness within Apple's own design department, especially given its burgeoning product portfolio, or a change in ambitions for Coster alone. Regardless, this move indisputably benefits GoPro, though the company still faces more fundamental issues, as well.
Still not enough
To be clear, I firmly believe adding a veteran design presence to its executive team will undoubtedly help GoPro. However, in the grand scheme of the company's issues and opportunities, Coster's hire still doesn't address some of the more fundamental issues facing the company. I see two core problems GoPro must deal with, or at least sufficiently manage, in order to become a long-term viable consumer-electronics company.
Source: Polaroid
The first is commoditization. Like so many hardware industries before it, GoPro has been undoubtedly affected by the raft of similar products that have flooded the market in recent years.
The company's solution to this is to try to create a hardware-software ecosystem powered by its forthcoming video- and image-editing software. While plausible, GoPro hasn't demonstrated any special historical ability in developing application software, a fact the company discloses as a risk factor in its SEC filings.
Will the editing software due this year prove compelling enough to justify the company's relatively expensive capture devices? Cosper's design expertise probably increases the odds of success for GoPro here. However, as a mission-critical agenda for the company, its relative lack of experience in executing software products certainly looms large in my eyes.
The second problem potentially weighing on GoPro results is the replacement cycle of its devices. Consumers tend to refresh their smartphones once every few years. Analysts have argued that this leads to an annuity-like business model for Apple. However, key structural differences between the smartphone market and action camera market might make the same dynamic less plausible for GoPro.
Market features like handset subsidies, and the simple fact that smartphones are nearly appendages for many of us, help support relatively tight refresh cycles. However, can the same be expected of GoPro's capture devices? The year-over-year Q4 contraction in devices sale for GoPro last year certainly supports this idea.
Ongoing hardware and software innovation can go a long way to mitigate these risks, although I still see problems with replacement cycles. Apple's ability to consistently produce new, leading products in each of its device categories has been the antidote to the problems often faced by its hardware-centric business models.
However, the key differences between Apple and GoPro cited above still loom large in my eyes. So while GoPro and its shareholders should be rightly excited about their new hire, a single hire is unlikely to fix some of the more-concerning aspects of GoPro's business model.
