Gree reports first quarterly loss since 2013, promises to break even for the year

A Pokelabo title released last year. Gree attributed recent losses to the publisher, acquired in 2012.

Japanese mobile gaming giant Gree reported dismal results for the second quarter of its fiscal year 2015 today, writing off JPY 7.6 billion (US$65 million) in net losses. It’s Gree’s second net loss as a public company, after landing JPY 311 million (US$2.6 million) in the red during the fourth quarter of fiscal year 2013. The firm listed on the Tokyo Stock Exchange in 2008.

Gree recorded net sales of JPY 24.1 billion (US$205 million) in the most recent quarter, down from JPY 25.4 billion (US$216 million) last quarter and JPY 32.6 billion (US$277 million) year on year.

Gree gained JPY 7 billion (US$59 million) in the wake of Gumi’s December IPO, but lost JPY 11.7 billion related to two companies it acquired: OpenFeint and Pokelabo. The former was purchased for US$104 million in 2011, and the latter was bought for US$173.8 million in 2012.

“We closed the OpenFeint service itself in December 2012, consolidating our platform operations in Tokyo,” Ronan Hand, a Gree spokesman, tells Tech in Asia. “We took on expertise from OpenFeint in areas such as server operation and infrastructure and maintained features of Gree Platform supporting game operation in overseas markets. However, after winding down English language support for developers last year, we made the decision to phase out from April overseas payments and support for game distribution to overseas markets.”

Hand says that the decision to phase out platform support for games targeting foreign markets was a “recent development,” explaining why a company that Gree shut down in 2012 was lumped into the reported losses. Hand adds that English language customer support will also be phased out in June this year.

Pokelabo’s focus on card-battle games was attributed to its poor post-acquisition performance, but the company is hoping it can rise to profitability by pivoting to a new genre.

“We have been strengthening the game development operations at Pokelabo to shift away card-battle games toward a lineup focusing on the more action-based mobile games known as ‘full native’ games in Japan,” Hand says. “Pokelabo has made great progress, releasing its first action RPG Cross Summoner last year and developing another game called Poitto Hero that’s due to open for pre-registration this spring, but we recognize that it will take time to complete the transition.”

After Gree’s first post-IPO net loss in 2013, the company closed its European headquarters in London, following an exit from the Chinese market and layoffs in the US and South Korea. Approximately 20 games were also put on the chopping block. Hand says that no further layoffs or closures are planned in the wake of this report.

Gree’s total fiscal forecast for 2015 anticipates net sales of JPY 98 billion (US$835 million) with operating income of JPY 20 billion (US$170 million), enough to potentially break even. That might be a rosy prediction, however. Gree is plenty active in the mobile game space, but its experimentation in non-gaming verticals draws attention to the steady decline of its core business. Its latest acquisition, a home renovation startup called Renoco, couldn’t be further removed from gaming.

As we have written about in the past, the one-time tech superstar has been transforming from a world-class slugger to a batter lost at the plate in search of a hit. But in the mobile gaming world, that’s all Gree needs to reassert its dominance.

Today’s report also confirmed that Gree plans to release its first co-developed title with ubiquitous messaging service Line, scheduled for a fiscal Q4 debut. It will certainly be hoping for a home run.