Ubisoft is in for a rough start this 2023.
The video game developer mentioned during its Jan. 11 conference call that it is increasing its write-down estimate to around $500 million and cutting its full-year revenue target following weaker-than-expected sales during the last quarter of 2022.
Ubisoft also announced it is postponing its online pirate RPG Skull and Bones to an undisclosed date to further improve the game.
Ubisoft Jan. 11 Conference Call Details
Ubisoft announced a set of measures dedicated to "strengthening its long-term growth and value-creation prospects" during its Jan. 11 conference.
These measures include depreciating around $538 million of capitalized R&D, concerning upcoming premium and Free-to-Play games and the newly canceled titles to focus on building its brands and live services into "some of the most powerful within the [gaming] industry."
Additionally, as part of its increased strategic focus, Ubisoft will adapt its organization to a more challenging market thanks to the ongoing recession, with an expected net reduction of its non-variable costs base of more than $215 million over the next two years.
Much like Gartner and the International Data Corporation, Ubisoft cited the deteriorating economy as a cause of these accelerated reductions, as evidenced by lower spending on non-essential goods.
Unfortunately, Ubisoft didn't mention the games it decided to cancel because of these changes. Regardless, these three games will join the other four the company canceled in late July, per Kotaku.
Furthermore, to better turn it into a profitable company in the immediate future, Ubisoft said that it would execute targeted restructuring within itself, divesting some non-core assets and usual natural attrition.
Simply put, the company could soon lay off a considerable amount of its employees in its non-core assets, with company CFO Frederick Duguet mentioning that these layoffs will be made through attrition.
Duguet also said that Ubisoft is now expecting a decrease in its full-year net bookings of more than 10%, as opposed to its previous target of growth of 10%.
Furthermore, Ubisoft announced it is postponing the release of its much-awaits pirate RPG Skull and Bones sometime between early 2023 to 2024 to further improve it before its official release. However, gamers wanting to experience a taste of what the game has to offer can look forward to its upcoming beta phase.
Ubisoft Share Price Plummet
As a result of Ubisoft's announcement, the company's shares fell by as much as 20%, with each share priced at around $21 as of the morning of Jan. 12. According to Reuters, Ubisoft's announcement prompted JP Morgan analysts to cut their estimates and price targets.
The analysts also noted that they cut their rating on Ubisoft from "overweight" to "neutral" due to a "weakening macro, a challenging industry environment, and the lack of visibility regarding the timing of releases and their potential success."
Cowen analysts added that another negative factor affecting the company was a shift towards mega-brands (well-known video game franchises) in the video game industry. With Ubisoft's focus on non-A-tier franchises like Skull and Bones, it is no surprise that the company is experiencing a slump in its revenue.
