Ambarella Doesn't Believe GoPro's 'Competitive Solution' Changes The Competitive Landscape

In January, Benzinga reported that GoPro Inc GPRO could add Qualcomm, Inc. QCOM as a component supplier and, consequently, lessen its dependence on Ambarella Inc AMBA.

Now, Ambarella is bracing for a financial hit as news of GoPro’s “second source” shakes 2018 sales guidance.

“Based on our current level of interaction with GoPro on product development activities, we believe GoPro is incorporating a competitive chip for at least one new mainstream camera product, which will negatively impact our revenues in the second half of the year,” CFO George Laplante said during Tuesday’s fourth-quarter earnings call.

CEO Feng-Ming Wang suggested the rival technology isn’t expected to have features beyond Ambarella’s offerings, such as 4G LTE capabilities.

Related Link: Ambarella's Hyper-Seasonality Continues To Be A Concern

“We do believe that it's very unlikely that an app-processor type of chip can be used in a GoPro form factor due to the power consumption limitation that we talked about in the past,” Wang said. “So I really don't think that's a processor type of chip.”

Wang added that GoPro’s diversified sourcing doesn't reflect a trend in the greater camera market.

“From our perspective, we really haven't seen any change in the other markets or customer environment from a competitive standpoint,” Laplante said.

The company predicts GoPro revenues to decline between 3 percent and 6 percent during the upcoming fiscal year, but non-GoPro revenues are expected to grow between 20 percent and 32 percent.

Ambarella shares dropped as low as 5.5 percent Wednesday and were trading around $55.90 at time of publication.