Gameloft sees faster growth from second quarter on new launches

Reuters News
Posted: May 15, 2012 5:58 AM
Gameloft sees faster growth from second quarter on new launches

By Alice Cannet

PARIS (Reuters) - Mobile video game group Gameloft expects growth to speed up from the second quarter of 2012 as it launches a record number of smartphone games based on a money-making model which allows it to double a game's revenue over its lifespan.

The French company expects sales to reach 192 million euros ($248.52 million) in 2012, compared with 164.4 million last year, chief financial officer Alexandre De Rochefort told Reuters on Monday. That would be roughly in line with the 194 million average of analysts' forecasts polled by Thomson Reuters I/B/E/S.

"If we make 59 percent growth in the first quarter without any launches and then we launch 10 games in each of the second, third and fourth quarters, it makes us relatively optimistic on the future growth rate especially driven by the smartphone growth rate," he said.

In the first quarter, the company's sales on smartphones rose 59 percent and represented 40 percent of group's sales, the rest being shared between feature phones - traditional mobile phones that have some added functionality - at 57 percent and large screens at 4 percent.

De Rochefort said the group's 2012 current operating margin would vary depending on sales. It stood at 13 percent in 2011.

"Everything will depend on sales since most of Gameloft's costs are fixed charges. The goal of 15-20 percent margin is more relevant today than ever," De Rochefort said, adding it could be reached between two to four years.

Demand for smartphones and tablets is booming, with Google's Android operating system seeking battling it out with Apple's iPads and iPhones.

Gameloft's sales on Android phones have risen from 25 to 40 percent of its total smartphone sales between March 2011 and March 2012, eating into Apple's share.

The company - headed by Michel Guillemot, one of five brothers who founded Ubisoft - competes with Electronic Arts, which has roughly 50 million monthly active users against 45 million for Gameloft.

Last year, the company switched from a 'premium' model, where users paid a one-off fee for a game, to ones where players can progress faster in the game by purchasing virtual goods with "real" money.

This new model - which already accounts for 70 percent of Gameloft's sales, up from zero last year - allows Gameloft to double each game's revenue over its lifespan and provide it with recurring revenue, De Rochefort said.

Gameloft's largest source of income, however, still comes from sales on traditional more basic cell phones, particularly common in emerging countries and which make up 57 percent of total revenue but grow at a much slower rate than sales on smartphones.

"In Europe, the United States and Japan, there are fewer and fewer people using feature phones, however, in emerging countries, it is colossal," he said.

Gameloft has a market value of around 385 million euros.

($1 = 0.7726 euros)

(Reporting by Alice Cannet; Editing by James Regan)