Slow 5G take up hampers Angry Birds gaming profits

Angry Birds game characters are seen at the Rovio headquarters in Espoo, Finland. REUTERS/Anne Kauranen/Files

HELSINKI (Reuters) – Quarterly profit at “Angry Birds” maker Rovio Entertainment plunged 96% as the mobile games company was hit by the slower-than-expected take up of its 5G gaming platform Hatch and higher marketing costs.

Shares in the Finnish company slumped 22% in early Wednesday trading after it said it was evaluating “strategic alternatives” for Hatch, while also looking to make annual cost savings of 6 million euros ($6.6 million) for the 80%-owned unit.

It did not elaborate what those alternatives might be, but said it planned to shift the unit’s emphasis to Hatch Kids, a subscription and streaming service for children and families.

Rovio, looking for ways to build on the success of the 10-year-old “Angry Birds” series of games, said competition in games streaming had intensified globally while the roll-out of 5G networks and devices had been slower than anticipated.

Last year, the company opened up Hatch to outside investment, but on Wednesday it closed the fundraising without announcing any new investors.

Fourth-quarter adjusted operating profit tumbled to 200,000 euros ($220,000) from 5.3 million euros a year earlier, while sales dropped 1.4% to 71.6 million euros.

Games revenue and gross bookings both hit new records, at 66.7 million euros and 67.0 million euros, respectively.

But so-called user acquisition costs, such as the cost of getting games displayed prominently in app-stores, jumped 18% to 27.5 million euros, or 41.3% of games revenues for the quarter.

The company said acquisition costs had been lower so far this year which, coupled with the planned cost savings at Hatch, should lead to an improvement in adjusted operating profit in 2020. It did not give revenue guidance for this year.

Rovio proposed a dividend of 0.09 euros per share, similar to last year.

(Reporting by Anne Kauranen, editing by Louise Heavens and Mark Potter)

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