Highlights
- Sega logs a $200M Rovio impairment amid mobile performance weakness.
- Operating income falls 54.6% despite 4% YoY net sales growth.
- Underperforming new titles and market competition pressure results.
Sega Sammy Holdings took a roughly $200 million impairment charge on Rovio Entertainment in its fiscal third quarter, a setback to the Japanese company's mobile gaming expansion less than two years after acquiring the Angry Birds developer.
The write-down of ¥31.3 billion ($200 million) contributed to a sharp decline in profitability for the nine months ended Dec. 31, even as revenue edged higher. Operating income fell 55% to ¥19.8 billion ($129.2 million), while net sales rose 4% to ¥335.2 billion ($2.1 billion), Sega Sammy said Thursday.
The impairment reflects Rovio's struggle to meet business development targets set when Sega completed the $776 million acquisition in August 2023. "Rovio found it difficult to advance its initially planned business development," Sega said in a filing, adding that profitability "has fallen below the initial forecast."
Sega's Mobile Gaming Strategy Faces Setback After Rovio Acquisition
Sega determined Rovio's recoverable value had dropped significantly below its carrying amount after reviewing the unit's performance. The company cited rapid market changes, intensified competition and the launch of major rival titles as factors that hurt Rovio's ability to attract and retain players.
The Finnish studio's quarterly results were "sluggish" and "fell significantly short of the initial forecast due to rapid changes in the market environment," according to Sega's investor presentation.
Sonic Rumble, a mobile title co-developed by Rovio that launched in the quarter, missed expectations particularly in customer acquisition. The game was released alongside Football Manager 26, which Sega said performed steadily.
Sega Sammy
The company's Entertainment Contents segment (which includes game development and publishing) saw operating income decline 31% to ¥23.7 billion ($154.05 million). New full-price games and free-to-play titles underperformed, though existing free-to-play games maintained steady performance. Revenue from licensing, subscriptions, downloadable content and animation exceeded expectations.
Sega revised its full-year forecast, raising the net sales target to ¥490 billion ($3.18 billion) from ¥475 billion ($3.09 billion) but cutting the operating income projection to ¥40 billion ($260 million) from ¥53 billion ($344.5 million).
To stabilize Rovio's operations, Sega appointed Daniel Svärd as chief operating officer. Svärd previously led live game studios at King, the developer behind Candy Crush. Sega said it would focus development on core intellectual properties, expand its transmedia strategy and strengthen management systems.
The Rovio acquisition was intended to accelerate Sega's expansion in mobile gaming, a market the company identified as having high growth potential. Sega aimed to leverage Rovio's expertise in live-service mobile operations to bring franchises like Sonic the Hedgehog to mobile audiences in Europe and North America.
