UPDATE 1-Angry Birds maker sees profit halve as free games proliferate

Mon Apr 28, 2014 9:46am EDT

(Adds details, analyst)

By Jussi Rosendahl and Sakari Suoninen

HELSINKI, April 28 (Reuters) - Finland's Rovio Entertainment, maker of the Angry Birds computer game, said its earnings halved last year due to investments in its animation business and stalling sales.

After scoring a global breakthrough with Angry Birds, in which players use a slingshot to attack pigs who steal birds' eggs, Rovio has expanded the brand into an animated TV series and merchandising of toys and clothing.

But the company faces a battle to extend its initial success and one analyst said it had been late to respond to a shift to freely available games on smarphones such as Apple Inc's iPhone.

"It has to find captivating free games in the next year or it risks losing consumer interest," analyst Tero Kuittinen at consultancy Frank Magid & Associates said on Monday.

Rovio said its net profit after tax slumped to 26.9 million euros ($37 million) from 55.5 million in 2012, on revenue which remained roughly flat at 156 million. Operating profit fell to 36.5 million euros from 76.8 million.

Rovio itself called the year "foundation-building" and added that future results would depend on how well last year's investments perform.

The company's stalling sales meant Rovio fell far behind its rivals in mobile gaming. Clash of Clans maker Supercell, also from Finland, saw revenue grow to $892 million in 2013 from $101 million a year earlier, while sales at Sweden's King Digital Entertainment grew more than tenfold to $1.88 billion.

Angry Birds downloads have exceeded 2 billion, making it the most downloaded game ever, Rovio said. ($1 = 0.7227 Euros) (Editing by Keiron Henderson and David Holmes)

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