Ubisoft shares slump after warning over games delay
PARIS (Reuters) - Shares of French videogames publisher Ubisoft slumped more than 25 percent to an eight-month low on Wednesday after delaying the release of two titles until next year, missing the holiday season in the hotly competitive industry.
Although the home-console market is no stranger to delayed releases, Ubisoft's move is the latest sign of mounting pressure in an industry where increasingly big-budget titles are having to fight harder to attract gamers' time and money in the face of nimbler and cheaper mobile alternatives.
"In a world of mega-blockbusters, we have now come to the conclusion that the team needed additional time," Yves Guillemot, chief executive of the company behind the Assassin's Creed and Far Cry series, told investors on a conference call.
Ubisoft blamed the delay on pressure to meet consumer expectations in the $66 billion hit-driven videogames industry and said the decision would cause it to swing to an operating loss for its 2013 to 2014 fiscal year.
The announcement, in a statement after Tuesday's market close, follows the huge success of Grand Theft Auto V, released last month by a unit of Take-Two Interactive, in which hedge-fund billionaire Carl Icahn owns a stake.
The delayed games, dystopian hacking adventure Watch Dogs and racer The Crew, were due to launch alongside next-generation consoles from Sony and Microsoft, making the sacrifice for quality a risky one in some investors' views.
"This is a pretty severe downward revision - these games were supposed to come out in time for Christmas," said Gregoire Laverne, a Paris-based fund manager at Roche Brune.
"They're being delayed for reasons of quality, which is a good thing, but companies like Ubisoft already have a tendency to restrict the amount of titles they produce. If they release fewer games they have to be a blockbuster every time, there is no room for error."
Shares of Ubisoft ended the day down 26.2 percent at 8.19 euros, giving it a market value of 782 million euros. The stock fell as low as 7.55 euros, its lowest since February.
The company now expects to report an operating loss of between 40 million euros ($54 million) and 70 million, against a previous target for a profit of 110 to 125 million.
Ubisoft also cut its sales forecast for 2013 through 2014 to between 995 million euros and 1.05 billion from a previous target of 1.42 to 1.45 billion.
The console market is trying to shrug off declining sales and the rising quality of mobile games with the launch of new high-powered machines, which themselves need major triple-A titles to generate interest.
"Console game revenues have been falling for a few years now, which has been very difficult for the games companies and one reason why there has been a focus on a smaller number of blockbuster titles," said Ed Daly, managing partner at Tenshi Consulting.
"People are managing to get their fix of games on other devices, especially smartphones."
The rapid growth of mobile gaming, thanks to devices such as the Apple iPhone, contrasts with consoles' woes and is attracting investor interest: Japan's SoftBank Corp is offering Nokia 150 billion yen ($1.52 billion) for a majority stake in Finnish mobile games-maker Supercell.
Publishers like Ubisoft and industry heavyweight Electronic Arts are also pouring resources into mobile: Ubisoft earlier this month announced the acquisition of mobile studio Future Games of London, while mobile and digital accounted for over 76 percent of EA's fiscal first-quarter revenue.
"The big-budget massive console releases, the triple-A releases, those gambles are becoming increasingly important to get right," said Nick Gibson, founder of Games Investor Consulting. ($1 = 0.7406 euros) ($1 = 98.8650 Japanese yen)