The shakeup of the drone industry continues. Parrot has announced plans to lay off nearly 300 employees after sales estimates failed to meet their fourth quarter targets by as much as 15%. In 2017, the company looks to pull back on going head to head with bigger drone companies and focus on a commercial strategy that can make it more profitable.
“The commercial performance for consumer drones in the fourth quarter was achieved based on margins that would be insufficient to deliver profitable growth for this business over the medium and long term. The Group has set itself a priority to rapidly meet this challenge with a strategy to rebalance its finances.” – Parrot’s year-end report
We reviewed the Parrot Bebop back in 2015, and while it was fun to fly, it was more of a pricey toy than it would be a usable aerial cinematic platform, and both the DJI Mavic and GoPro Karma (when it returns) can do a much better job at the high-end personal drone game.
Parrot tried in 2016 to expand the drone category to include remotely piloted vehicles for land, sea and air, in an attempt to differentiate itself. But sales haven’t reached their target goals, and thanks to low margins in the consumer drone space, there is very little runway to ride out the storm.
Most of the layoffs come from positions made redundant at their drone manufacturing facilities in France, with the rest of the layoffs being made to international positions. In addition to laying off almost 35% staff, Parrot plans to realign and focus on key areas in 2017:
- Focusing the capacity for innovation on a reduced number of products with a commitment to taking a significant technological step forward
- Redeploying the product offering, capitalizing in particular on the expertise built up in commercial drones
- Realigning sales and marketing resources around the most profitable distribution channels and most promising markets
How this translates practically, equates to Parrot accelerating the development of more commercial drone applications, since that segment of the industry is exploding thanks to 3D mapping, agricultural monitoring, inspection, and even news coverage.
In addition, according to the fourth quarter report, Parrot is looking at their strategic partnerships with auto manufacturers, which would seek to transfer their remote control knowledge base for perhaps self-driving applications. But the report mentioned holding those “assets for sale,” meaning that Parrot may be planning to spin those partnerships off or sell them outright.
Overall, Parrot plans to grow in the drone market by 10% in 2017, and hopes to just break even for the year by focusing on the commercial market.
You can’t really blame them… They’ve seen a major shakeout of the drone industry, with DJI dropping prices on their Phantom and Inspire drone, and expanding its capability to make them more attractive. This strategy has increased their dominance in the high-end aerial camera market, while taking out the competition.
DJI has this advantage because they have their own manufacturing, while Parrot and others have to use third parties for fulfillment. Faced with these challenges and diminishing returns on sales, Parrot has to look for how they can carve out a niche as the market continues to evolve. So far, it hasn’t worked for many drone makers.