Action camera-maker GoPro is cutting 200 jobs and shutting down some of its services.
In addition, the US company said its president, Anthony Bates, would quit his post at the end of the year after three years in the job.
GoPro said that consumer demand for its products remained "solid".
However, the company has posted a loss in each of its past four quarters.
At the start of this month it also revealed its cash reserves had fallen to $132m (£106m) - less than half the amount at the start of the year.
"I knew they were in trouble, but I didn't expect them to have such a dramatic fall from grace," Tom Morrod, director of consumer electronics at the IHS consultancy, told the BBC.
"The Karma drones were their recover strategy, and when they had to be recalled it faltered. This is the result.
"GoPro was struggling as an action cam specialist, which is why it needed an alternative market. The fact that the device was unsalable has damaged its prospects, at least temporarily."
The job cuts represent 15% of the California-based company's workforce.
The move reflects the fact that even if the fold-up Karma drone returns to sale, GoPro will probably have missed out on the Christmas shopping season.
It had sold about 2,500 of the drones in the 16 days they were on the market.
A problem with the machines caused a number of them to lose power mid-flight, causing them to fall uncontrolled out of the air.
One video of an accident showed the drone diving on to a beach on which people were walking.
There have been no reports of injuries. However, the company is being sued over claims it misled investors about demand for the product and took too long to alert the public to its power supply flaw.
Reviews for GoPro's new Hero 5 cameras have generally been positive. The new devices introduced voice control, electronic image stabilisation and built-in water resistance.
However, some technology blogs doubted whether the features were enough to convince existing owners to upgrade.
And the company faces increased competition from rival action cams and the improved quality of smartphone cameras, many of which now also offer protection against water.
As part of its cutbacks GoPro is also closing its entertainment division.
The operation was announced in July 2015 and offered owners thousands of dollars for videos they had filmed using its equipment.
In return it wanted the right to promote their content through its social media accounts.
It also sought to sell the rights to the material to advertising agencies and split the proceeds.
The company described it as a "no-brainer" for creative professionals at the time.
GoPro's shares were trading 2.5% up on the day by early afternoon in New York, but they remain down on their value at the start of the year.