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Ubisoft Sees Major 18 Percent Share Plunge
Ubisoft Sees Major 18 Percent Share Plunge
November 16, 2010 | By Leigh Alexander

November 16, 2010 | By Leigh Alexander
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Ubisoft's shares saw an 18 percent drop following its recent financial results, as the company reported substantial losses on increased sales along with title delays. According to Bloomberg, that's the company's biggest intra-day drop since at least 1996.

Ubisoft's now trading at 7.95 euros ($10.71), and received ratings downgrades to "hold" from "buy" from Deutsche Bank AG and to "reduce" from "buy" from Natixis SA. Wedbush analyst Michael Pachter called the performance "well below expectations".

On the delay of Ghost Recon: Future Soldier and Driver: San Francisco to fiscal 2012, Pachter said the company's lineup for the rest of the year, which includes Assassin's Creed: Brotherhood, Just Dance 2 and Michael Jackson: The Experience alongside many Kinect titles is "quite strong" as it is.

Part of the company's financial results announcement included its plan to restructure its studios, cutting some projects to allow their staff to place all their focus on bigger AAA projects. Pachter believes this strategy offers the company more profitability potential.

"We continue to believe that Ubisoft has the potential to deliver much higher revenue and EPS going forward as it focuses on AAA-quality franchise games with a history of success," the analyst says.

Ubisoft will concentrate on its major franchises, planning to release three or four games a year; such titles "have a much greater profit upside than non-AAA games," according to Pachter.

"The game shift makes breakeven for [fiscal 2011] more risky, but increases the likelihood of substantial earnings growth in [fiscal 2012]," he suggests. "However, the company has slipped at least one high profile game each of the last two years, making the FY:12 lineup less certain."


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Comments


Tom Dazed
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"Pachter said" ... and who cares? Really, he looks on Activisions CoD series and it's margins and thinks "everybody should do that". But he is not on the pulse... tide is turning, for CoD and the multiplattform system. People are fed up with bugs and low quality ports.

Rodolfo Rosini
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"Ubisoft will [...] release three or four games a year"



Am I the only one troubled by that statement? This means that if one game performs worse than expected you're losing a quarter of your profits easily. They should keep their AAA strategy and on the side perform a ton of low cost, quick to make games OR merge with other studios so they have a pipeline bigger than 4 title/year.



No wonder the market thinks this stock is too volatile.

Carlos Nazareno
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Well if execs at Ubisoft weren't such douchebags and insisted on such ridiculous draconian "always connected to the internet" DRM that added no value to the experience whatsoever, they could have sold more games.



Let this be a lesson to all other companies looking to pull the same shenanigans.

Lo Pan
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Isn't Ubisoft subsidized by the French Government?

Stephane Jacoby
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That would be the Quebec and Ontario Governments.

Lo Pan
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That actually might be Gameloft. I still thought development for Ubisoft was in France...

Stephane Jacoby
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Definitely Quebec. Ubisoft Montreal is Ubi's largest development studio, by far.

Merc Hoffner
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News Flash!

Profits are down even while revenues are up!

Rising R&D costs to blame!

One man has the answer:

Patcher: "More eggs in fewer baskets!"

Ian Uniacke
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I may be reading it wrong in thinking that Ubisoft is going to abandon there strategy of making lots of titles (which I think is how they became so big in the first place), but it sounds like a massive mistake to me. Further it sounds like they are interpreting the results fallaciously. Assassins Creed for instance wasn't born a AAA title. It could as easily have turned out in a parallel dimension that Red Steel for instance turns out to be a 5 million a game franchise. What Ubisoft did right was see the sales of Assassins Creed and put more into it. But they still need to make lots of cheap experimental games in my opinion. Just my 2c.

Antonio Blázquez
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It's common sense to make less products in bad times but making well all of those. A 18% is too much for a big company.

Merc Hoffner
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There's truth to that, but their losses weren't incurred due to poor performance as sales were up significantly. Their explanation was that R&D costs were up by an even greater degree. They should be making many small products on small budgets (as have proved succesful for them for some time), and cut the pseudo-AAA chaffe. Products like H.A.W.X.2 and R.U.S.E. are soaking up triple A budgets but aren't producing the sales (or quality) to match. I say, preserve the budgets for big games that are dead certs, (Assasin's Creed), and divert cash from any other big games to a larger number of small projects. Small games can turn a good ROI but are risky, but if big games become risky and are now turning a poor ROI, then what's the point of them?

Ian Uniacke
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Exactly. Why make more HAWX when you can make more Just Dance at a fraction of the price and generate 8 times the revenue? (8 times is a total guess for the record)

Antonio Blázquez
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Yes.. bugs and low quality games but the new COD has raze all the records and wait to the next Battlefield they will say it's better with no bugs and people will buy again a bug full game with the same graphics.



Now that I talk about same graphics. Could you here in gamasutra make an article if you feel that is interesting about the fact that games in PC are stagnant in part because of the abuse of console ports?

I've notice that games in PC are almost the same(talking about graphics, use of CPU,etc..) from the time of Crysis.



I think big part of the trouble comes probably because the 6 years that is suposed to stand the actual console generation is a longer period than the 6 years the before generation has. I explain this because of the technological acceleration. Normal PC's overpowers game-consoles since 2 years... what's gonna happen the future 2 years till PS4, XBOX "X", etc.. comes?



Sorry for my English, I'm a Spanish fan.


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