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March 3, 2016, 5:57 p.m. EST

GoPro supplier Ambarella posts 71% profit drop

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By Ezequiel Minaya

Ambarella Inc., a key chip supplier to recently stumbling GoPro Inc., on Thursday posted a profit decline of 71% for the fourth quarter and issued downbeat financial guidance for the current three-month period.

Shares of Ambarella, down 26% over the past year, dropped 5.9% to $43.53 on Thursday.

For the quarter ended Jan. 31, Ambarella reported profit fell to $5.1 million, or 15 cents a share, from $17.7 million, or 53 cents a share, a year earlier. On an adjusted basis, earnings were 64 cents a share, down from 68 cents a share. Sales rose 5% to $68 million.

Though profit declined, the company did exceed forecasts. For the fourth quarter, Ambarella had expected revenue of $65 million to $67.5 million. And analysts surveyed by Thomson Reuters had forecast adjusted earnings per share of 48 cents.

For the first quarter of current fiscal year, the company expects sales of between $55 million and $57 million, with adjusted net income between $8 million and $10 million. Analysts surveyed by Thomson Reuters had expected revenue of $62 million and adjusted net income of $14.3 million

Ambarella makes image-processing chips used in digital camera products. The company counts law enforcement, home security and drones among its markets, but its business with GoPro is significant.

Pacific Crest analysts estimate GoPro will account for as much as 25% of Ambarella's revenue for the fiscal year, which means GoPro's pain is shared with its partner.

Indeed, GoPro has forecast an annual revenue decline this year that would be its first such drop.

GoPro's struggles began last summer when the company launched a camera design that was new relative to its traditional action-camera form. The so-called Hero4Session didn't sell well, leading to two cuts that brought the camera's price down to half its $400 launch price.

Write to Ezequiel Minaya at ezequiel.minaya@wsj.com

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