Ubisoft Update on Third Fiscal Quarter Performance and Annual Targets

Key insights

6 takeaways

01
Ubisoft lowered its fiscal year 2009-10 sales forecast from €1,040 million to €860 million, projecting a €50 million operating loss instead of the previously anticipated €70 million profit.See it on page 1
02
A 50% decline in casual segment sales, driven by a contraction in the Nintendo DS market, resulted in a €160 million revenue shortfall.See it on page 2
03
The company is shifting development resources away from the casual segment to focus on high-end franchises for Xbox 360 and PlayStation 3.See it on page 2
04
Strategic delays of Tom Clancy’s Splinter Cell Conviction and R.U.S.E into the 2010-11 fiscal year contributed to the reduced revenue and triggered additional impairment charges.See it on page 1
05
While Assassin’s Creed 2 and Just Dance performed well, the company’s broader back-catalog struggled as the market shifted toward high-quality AAA titles.See it on page 1
06
The 2010-11 recovery strategy centers on a major release slate including a new Assassin’s Creed title, a new Ghost Recon entry, and the delayed Splinter Cell Conviction.See it on page 2

Summary

Ubisoft has issued a downward revision of its financial targets for the 2009-10 fiscal year, citing significant market shifts and internal product delays. The company lowered its full-year sales forecast to approximately €860 million, down from the previously projected €1,040 million. Consequently, the firm now anticipates a current operating loss of roughly €50 million for the year, a sharp reversal from the earlier expectation of at least €70 million in operating income.

The primary driver of this underperformance is a severe contraction in the Nintendo DS market, which caused a 50% decline in casual segment sales, amounting to a €160 million shortfall. While the company saw success with titles like Assassin’s Creed 2 and Just Dance, other releases failed to meet expectations, and the broader industry trend toward high-quality AAA titles left older back-catalog products struggling. Furthermore, the strategic decision to postpone the releases of Tom Clancy’s Splinter Cell Conviction and R.U.S.E to the 2010-11 fiscal year contributed to the reduced revenue projections and necessitated additional depreciation and impairment charges.

In response to these challenges, the company is pivoting its development resources away from the casual segment and toward high-end franchises on the Xbox 360 and PlayStation 3 platforms. The 2010-11 lineup is designed to capitalize on this shift, featuring major titles such as a new installment in the Assassin’s Creed series, a new Ghost Recon entry, and the delayed Splinter Cell Conviction. By concentrating on these core consoles and major franchises, the company aims to regain market share and restore profitability in the coming fiscal year.