IPO hangover? Gumi reveals its expected $10.6M profit will be a $5M loss

IPOs bring champagne showers – and increased financial oversight. Gumi, the gaming firm that had been left for dead but regrouped and surged to a nearly billion dollar IPO, is getting a first-hand lesson in the consequences of that oversight. The company announced today that is is revising its guidance for the fiscal year ending April 30. Instead of a JPY 1.27 billion (US$10.6 million) profit, the firm will face a JPY 600 million (US$5 million) loss.

The US$10.6 million would have been a crowning achievement for Gumi following a loss of JPY 160 million (US$1.33 million) for the previous fiscal year. Now, the company will have to face a chorus of questions about whether or not it can keep producing world-beating games or if its time in the sun has passed.

The company attributed the loss to three main reasons. First, lower than expected revenue coming in from the overseas version of its hit game Brave Frontier. Further, Gumi noted that it had not been able to orchestrate the international publishing of its games on the schedule it had initially proposed. Finally, aside from Brave Frontier, the firm’s other titles overseas did not grow as strongly as anticipated.

As a solution, Gumi is promising the following:

• Initiate new monetizing strategies for Brave Frontier in Japan, then export them overseas

• For Phantom of Kill, the company expects the commercials that are running in this quarter will net many more users and increased revenue

• For Dragon Genesis, the company will stand pat on its current model of relying on just core users to generate high revenue

• For Sword Art Online Code Register, the company will look to Bandai Namco to devise further monetization plans. Bandai Namco is a partner of Gumi and responsible for the sales of the game

• It will speed up the development of 18 native games that are waiting in the wings

• Overseas, it will make a stronger cross-border publishing operation, strengthen relations with IP holders to prevent game delays, and release original titles

• Development fees will be slightly scaled back

• Games will have to go through a more rigorous examination before they are approved for advertising fees. Gumi aims to have advertising fees be no more than 15 percent of gaming revenue

Finally, and most dramatically, Hironano Kunimitsu, the founder and CEO of Gumi will not receive a salary for the next six months. He is docking his own pay as a sign that he takes responsibility for the disappointing results.